
Class D 1 43 

Book_ 

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CSEXRIGHT DEPOSm 



THE 

PEACE OF JUSTICE 

BY 

RAPHAEL-GEORGES LEVY 

MEMBER OF THE INSTITUTE OF FRANCE 
SENATOR OF FRANCE 

With a Preface By 
RAYMOND POINCARfi 

FORMER PRESIDENT OF THE 
FRENCH REPUBLIC 



And an Appendix Containing the Protocol •/ 
the Reparations Commission of April 2S y IQ2I 




NEW xflP YORK 
GEORGE H. DORAN COMPANY 



ity-five cents net 



THE PEACE OF JUSTICE 
RAPHAEL-GEORGES LEVY 

TsHo 



THE 

PEACE OF JUSTICE 

t 

BY 

RAPHAEL-GEORGES LEVY 

MEMBER OF THE INSTITUTE OF FRANCE 
SENATOR OF FRANCE 

With a Preface By 
RAYMOND POINCARfi 

FORMER PRESIDENT OF THE 
FRENCH REPUBLIC 



And an Appendix Containing the Protocol of 
the Reparations Commission of April 28, IQ21. 



NEW SHjP YORK 
GEORGE H. DORAN COMPANY 









y* 



COPYRIGHT, 192 1, 
BY GEORGE H. DORAN COMPANY 



OCT-3'2 



©CI.A6271.83 

PRINTED IN THE UNITED STATES OF AMERICA 



*w* 4 



M 

i 

6 



PREFACE 



None is more highly qualified than Mr. Raphael- 
Georges Levy to undertake the task of examining 
the Treaty of Versailles and the grave problem of 
Reparations. A political figure, as also member of 
the Institute of France, an Economist and Senator, 
he is better informed than any one else on the great 
European questions and on the true financial con- 
ditions of the countries of the Old World. 

After a conscientious inquiry into the facts and 
figures he has come to the conclusion that the 
vanquished are able to pay their debt progressively 
and that justice can be done without risk of bringing 
about the downfall of Germany. His abundant 
logic, the force of his proofs, the undeniable pre- 
cision of his calculations can leave no doubt of this 
in the most critical minds. 

He shows clearly how specious and erroneous is the 
theory advocated in England by Mr. Keynes, which 
the Germans so promptly made their own in order 
to try and escape all their obligations. To brilliant 
paradoxes he opposes realities, and fictions most 
ingenious he answers by conclusive evidence. 

Our friends in Great Britain and in America will 
read with great interest these pages full of substance. 
They have largely contributed to the victory of 

[5] 



PREFACE 

right. They will surely not be content to-day that 
the right of victory shall be overlooked. 

France has no imperialistic thought. Having 
recovered the provinces which were torn away from 
her and never having thought to achieve any 
territorial annexations, France is not now nor was 
she hitherto under the spell of conquest. 

France did not declare war, did not seek war, did 
not desire war. France was subjected to war; and 
the day she won, with the help of her allies, she let 
fall her sword without hatred, without rancour. 

But France has suffered dreadfully from long- 
drawn hostilities of which her invaded territories 
were the scene. In all her northern and north- 
eastern provinces, her towns and villages were de- 
stroyed, her fields ravaged, her forests razed, her 
mills and factories pillaged or burned, her mines 
flooded. 

On the battlefields France lost all the flower of her 
youth, fourteen hundred thousand of her children — 
that is to say, about as many human lives as were 
sacrificed by all the other allied and associated 
nations combined. 

Thus France finds herself grievously weakened; 
and whatever her courage, whatever her will to re- 
cover, she cannot single-handed face the frightful 
task of restoring her devastated regions. In order 
not to be borne down by the burden, she must be 
assured of having an effective means of recovery 
against Germany and of being reimbursed for the 
advances she was compelled to make to the victims 
of the war. 

[6] 



PREFACE 

Does Germany, the debtor, need time in order to 
pay? — time will be granted her; in the beginning 
can she pay only in kind? — the propitious moment 
will be awaited to ask her to pay in specie. 

No one wishes to either strangle or starve her; on 
the contrary, the whole world wishes, in Germany's 
own interest and in that of others, that she may 
see better days; but as she is industrious and enter- 
prising she is certain to recover rapidly, she will soon 
be in a position to devote part of her income to the 
payment of her debt and to give, if need be, mean- 
while, security and pledges to her creditors. 

What is essential is that, after having launched 
upon the world the most ghastly catastrophe known 
to the world, Germany shall not seek to get out of 
it by playing before us the comedy of irretrievable 
misery and everlasting insolvency. 

Mr. Raphael-Georges Levy has shown beyond 
doubt that our claims are not excessive, that they 
conform not only to the stipulations of the treaty, 
but also to the precepts of right, and are not of a 
nature to hinder, in future, a fresh economic develop- 
ment of Germany. 

Since our American friends have reserved to them- 
selves the liberty of revising, in so far as they are 
concerned, the conditions of peace, I have no doubt 
that they will find in Mr. Raphael-Georges Levy's 
book the strongest reasons for approving all that the 
Treaty contains which is of vital interest to France, 
and particularly all that concerns reparation for our 
losses. 

Raymond Poincare. 
[7] 



NOTE 

This edition is an abridgment of the original 
French edition and has been prepared by Mr. 
Maurice Leon of the Bar of New York with 
the cooperation of Mr. Charles Stewart Davi- 
son and the assistance of Mr. M. Wm. Biggs. 



CONTENTS 

CHAPTER I 



PAGE 



Introduction 13 

CHAPTER II 
The Economic Aspect of the Treaty of Versailles . 19 

CHAPTER III 
Germany's Capacity to Pay 51 

CHAPTER IV 
Conclusion 79 

Appendix: Protocol of the Reparations Commission 
of April 28, 1921 88 



THE PEACE OF JUSTICE 



THE PEACE OF JUSTICE 



CHAPTER I 



INTRODUCTION 



This book, which I have entitled, "The Peace of 
Justice," deals, above all, with the Treaty of Ver- 
sailles, which will make the date of its signing, 
June 29th, 1919, memorable for all time. Of this 
document I have considered only the financial and 
economic clauses. 

I have thought that it would serve a useful purpose 
to marshal these clauses before the reader's eyes, for 
since the interested nations entered into the solemn 
engagements involved by the treaty a portion of 
Europe has been wrapped in a strange atmosphere. 
Instead of taking steps to carry out loyally the 
terms accepted by them, certain nations seem now 
to have no other objects than to evade their duty, 
conceal their resources, depict their own condition as 
being infinitely more deplorable than is actually the 
case, and balk at the effort necessary to effect repara- 
tion that cannot be dispensed with. One cannot 
ignore the striking contrast between this attitude 
of the Germanic peoples, who, no sooner than the 
treaty was signed, sought^every means of avoiding 

[13] 



THE PEACE OF JUSTICE 

the performance of their solemn contracts, and the 
action of the French people who, instead of resting 
upon the laurels of victory, are returning undaunted 
to their labors in field and factory. Only two years 
after the signing of the peace, France is gathering in 
a harvest which approaches the crops of before the 
war, in spite of the fact that extensive tracts of 
land are still unfit for cultivation. Our factories, 
if they could only be supplied with the necessary 
quantities of coal, as stipulated by the Treaty of 
Versailles, would also be producing on a large scale, 
and the manufacturers are now putting forth super- 
human efforts to set every machine in motion as 
formerly. Statistics have been published showing 
with what degree of completeness railways, roads, 
bridges, and public works of all kinds have been 
restored or repaired in the invaded regions. They 
form an eloquent commentary on the prodigious 
endeavor of our population. 

Meanwhile the state of mind existing among the 
vanquished is betrayed by their passive and under- 
hand resistance to the carrying out of many articles 
of the treaty. Unfortunately the obstacles placed 
in the way of fair fulfillment of promises have not 
arisen only in the direction where they might have 
been expected. Incredible though it may seem, 
there have been found among the Allies certain 
persons of singular mental trend who have closed 
their eyes to all the burdens which the war imposed 
on the belligerents except those which the van- 
quished must bear. One writer, whose book has 
had a wide circulation among the Anglo-Saxon 

[14] 



INTRODUCTION 

nations, took it upon himself to condemn the Treaty 
of Versailles. He undertook to prove that Germany 
was incapable of carrying out the majority of the 
engagements which she made. 

Our object is to prove the contrary. Whether 
we consider the situation in terms of the absolute 
or the relative, Germany can pay. Absolutely, 
because her wealth, vast in 1914, is still great; 
relatively, because she has not been organically 
injured and her capacity for production, both agri- 
cultural and industrial, is unimpaired, and because 
Germany still has the full use of her resources, 
while it will take France, victorious but ravaged 
by her enemy's ruthless warfare, long years of 
unremitting toil to rebuild the ruins of the north 
and the east. 

There is either misconception or lack of compre- 
hension of that stipulation, repeated in several 
places in the treaty, which invites those who are 
charged with the task of applying it to inform them- 
selves of Germany's capacity to pay. It is not a 
question of ascertaining whether or not her tangible 
assets would allow Germany at this very moment to 
turn over the 200 billion francs, a figure at which the 
minimum amount of damages suffered by France 
can be estimated without looking below the surface. 
It is simply a question of finding out whether 
Germany, having been acknowledged a debtor in 
this amount or any other amount established by 
estimating the damages prior to May 1st, 1921, in 
accordance with the treaty terms, is capable of pay- 
ing interest and principal. To propound this ques- 

[15] 



THE PEACE OF JUSTICE 

tion is to answer it. The data which we are giving to 
our readers will allow them to realize how easily 
Germany can assume this obligation. 

France has just given a fine example of fiscal 
courage by doubling her taxes all at once, creatin- 
10 billion francs of new income, which from 192 1 
will balance her ordinary budget. Is it admissibl 
that Germany should not do as much? It can be 
seen immediately how large a sum would be thus 
raised, considering that Germany has a population 
of 65 millions. If the French nation, with a popu- 
lation of 38 millions, can bear taxation to the extent 
of 20 billion francs, Germany should be able to raise 
more than 34 billions on the same basis of assess- 
ment. Germany is capable of meeting in full the 
obligations which she has accepted. 

It is well known that the Teutons are expert in 
disguising the truth. In 1870 they succeeded in 
making the world believe that we had been the 
aggressors. In 1914 the Kaiser reiterated that he 
did not desire war. In 1920 the Germans were 
whining over the burden imposed upon them. The 
refrain of their lamentation was, "We cannot pay." 
It would be unpardonable weakness if we were to let 
ourselves be moved by such jeremiads. There are 
too many who are prone to forget. The thought of 
our ravaged provinces should be present in the minds 
of the allied peoples night and day. The memory 
of the horrors committed by the invader is sufficient 
to make us appreciate how just it is that he should 
make reparation. Consideration of the plans of con- 
quest which he had prematurely drawn up leads us 

[16] 



INTRODUCTION 

to the conclusion that we have been too soft and 
moderate in our demands. We become convinced 
that what we asked — and obtained in promise — is a 
minimum, and that consequently there is only one 
policy open to us henceforward, to see that the 
treaty of 1919 is carried out to the letter. 

It would be well if this faithful picture of the 
actual situation in 1920 on both sides of the Rhine 
might serve to invigorate the vacillating wills of 
some of our allies. Unity of command gave us 
victory on the battlefield. Let us give the Germans 
to understand that the statesmen of the allied powers 
are united in their determination to obtain every- 
thing to which they are entitled. A people's 
capacity to pay is not measured alone by taking an 
inventory of the material wealth which at a certain 
moment happens to have been accumulated within 
that people's territory. It depends much more on 
the capacity for production and indeed on the 
people's will to work. This last factor is the essen- 
tial one. It is the factor which must be defined 
through the certainty that we will make it clear 
to the Germans that they will not be permitted to 
evade the fulfillment of their obligations. 

It has been justly said that the result of a battle 
depends, above all, upon the conviction of the com- 
mander who has confidence in victory and makes 
that confidence felt. It is because he never ceased 
to feel convinced of victory over his enemy that 
Foch triumphed. Let our diplomats, our ministers, 
our financial envoys and other experts become im- 
bued with this simple truth, that we are asking Ger- 

[17] 



THE PEACE OF JUSTICE 

many to return us half the amount of what we spent 
or lost in resisting her criminal invasion; that we 
will not abate our just demands by a single franc, 
by a ton of coal or one head of cattle. From the 
moment when they are sure that they will have to 
pay, then the Germans will begin to pay and to 
restore. 

It is our hope that this volume will help to en- 
lighten our fellow-countrymen and our allies. May 
it strengthen the resolution of those who at this 
time have the responsibility of administering our 
public affairs. 



[18] 



CHAPTER II 

THE ECONOMIC ASPECT OF THE TREATY OF VERSAILLES 

/. How the Treaty Took Form 

The nations which have just passed through the 
most terrible ordeal that the world has ever known, a 
war unprecedented in respect of the sacrifices in 
men and wealth which it entailed for the belligerents, 
may be compared to a convalescent still subject to 
relapses. They might have expected that with 
extreme care nature would by now have finished 
restoring to them sufficient health to resume their 
normal life. Unfortunately that hope has proved 
to be unrealizable. The greater the losses, the 
greater is the need for speed in repairing them. The 
longer the majority of the healthy population is 
forced to remain idle, the more energy must the 
survivors put forth to intensify the output of field 
and factory. This outlook, indeed, has no terror 
for the energetic peoples who have given full measure 
of courage and endurance in such warfare as the 
imagination of the most intrepid had been incapable 
of conceiving. 

The Treaty of Versailles was esentially a compro- 
mise between various opinions, and for that reason 

[19] 



THE PEACE OF JUSTICE 

it gives guarantees of moderation upon which too 
much stress cannot be laid. We shall now examine 
the economic aspect of that treaty. 

II. Fundamental Clauses 

The fundamental clauses of the treaty from the 
economic point of view are contained in Part VIII, 
entitled, "Reparations." First of all comes Article 
231, which establishes the basic principle upon which 
the contract rests. 

Article 231. "The Allied and Associated Govern- 
ments affirm and Germany accepts the responsibility 
of Germany and her Allies for causing all the loss 
and damage to which the Allied and Associated 
Governments and their nationals have been sub- 
jected as a consequence of the war imposed upon 
them by the aggression of Germany and her Allies. " 

The next article (232) mitigates in large measure 
the rigor of what is implied as a logical outcome of 
the foregoing article: 

Article 232. "The Allied and Associated Govern- 
ments recognize that the resources of Germany are 
not adequate, after taking into account permanent 
diminutions of such resources which will result from 
other provisions of the present treaty, to make com- 
plete reparation for all such loss and damage." 

This clause is explained later. It implies that the 
victors have waived restoration of all their outlay 
for waging the war, in a manner contrary to custom 

[20] 



ECONOMIC ASPECT OF THE TREATY 

and to what Germany exacted from France in 1871. 
Would not the Allies have been within their rights 
in demanding the payment of those sums? They 
confined their demands, however, to the following: 

"The Allied and Associated Governments, how- 
ever, require and Germany undertakes that she will 
make compensation for all damage done to the 
civilian population of the Allied and Associated 
Powers and to their property during the period of 
the belligerency of each as an Allied or Associated 
Power against Germany by such aggression by land, 
by sea, and from the air, and in general all damage 
as defined in Annex I hereto." 



These damages, specified in Annex I of this section, 
are defined as follows: 

ANNEX I 

Compensation may be claimed from Germany 
under Article 232 above in respect of the total 
damage under the following categories: 

(1) Damage to injured persons and to surviving 
dependents by personal injury to or death of civilians 
caused by acts of war, including bombardments or 
other attacks on land, on sea, or from the air, and 
all the direct consequences thereof, and of all 
operations of war by the two groups of belligerents, 
wherever arising. 

(2) Damage caused by Germany or her Allies to 
civilian victims of acts of cruelty, violence or mal- 
treatment (including injuries to life or health as a 

[21] 



THE PEACE OF JUSTICE 

consequence of imprisonment, deportation, intern- 
ment or evacuation, of exposure at sea or of being 
forced to labor), wherever arising, and to the surviv- 
ing dependents of such victims. 

(3) Damage caused by Germany or her Allies in 
their own territory or in occupied or invaded territory 
to civilian victims of all acts injurious to health or 
capacity to work, or to honor, as well as to the 
surviving dependents of such victims. 

(4) Damage caused by any kind of maltreatment 
of prisoners of war. 

(5) As damage caused to the peoples of the Allied 
and Associated Powers, all pensions and compensa- 
tion in the nature of pensions to naval and military 
victims of the war (including members of the air 
force), whether mutilated, wounded, sick or in- 
valided, and to the dependents of such victims, the 
amount due to the Allies and Associated Govern- 
ments being calculated for each of them as being the 
capitalized cost of such pensions and compensation 
at the date of the coming into force of the present 
treaty on the basis of the scales in force in France at 
such date. 

(6) The cost of assistance by the Government of 
the Allied and Associated Powers to the prisoners of 
war and to their families and dependents. 

(7) Allowances by the Governments of the Allied 
and Associated Powers to the families and dependents 
of mobilized persons or persons serving with the 
forces, the amount due to them for each calendar 
year in which hostilities occurred being calculated 
for each Government on the basis of the average 

[22] 



ECONOMIC ASPECT OF THE TREATY 

scale for such payments in force in France during that 
year. 

(8) Damage caused to civilians by being forced 
by Germany or her Allies to labor without just 
remuneration. 

(9) Damage in respect of all property wherever 
situated belonging to any of the Allied or Associated 
States or their nationals, with the exception of naval 
and military works or materials, which has been car- 
ried off, seized, injured or destroyed by the acts of 
Germany or her Allies on land, on sea or from the air, 
or damage directly in consequence of hostilities or 
of any operations of war. 

(10) Damage in the form of levies, fines and other 
similar exactions imposed by Germany or her Allies 
upon the civilian population. 



The destruction resulting from Germany's meth- 
ods of warfare is such that the enforcement of the 
foregoing conditions will be a heavy burden. It is 
nevertheless evident that such conditions constitute 
the minimum which the victors could have exacted. 
It was the duty of those who drew up the treaty to 
enumerate completely the damages caused and the 
financial consequences thereof. 

Considering that Belgium had suffered more par- 
ticularly from the violation of treaties, especially of 
the Treaty of 1839, which guaranteed her neutrality, 
the Allies demanded that Germany should restore 
to her all the sums which Belgium had borrowed 
from the Allied and Associated Governments up to 

[23] 



THE PEACE OF JUSTICE 

the time of the armistice, November nth, 1918, 
with interest at 5 per cent. The sum of these 
amounts will be determined by the Reparations 
Commission, and the German Government under- 
takes to issue immediately an amount of special 
bearer bonds, corresponding to that grand total, 
payable in marks on May 1st, 1926, or, at the 
option of the German Government, on May 1st of 
any year prior to 1926. 

All the economic clauses were weighed by those 
who framed the treaty in a spirit eloquently illus- 
trated in the reply of the Allied and Associated 
Powers to the remarks of the German delegation 
upon the terms of peace: 

"There exists on the part of the Allied and Asso- 
ciated Powers no intention of preventing Germany 
from taking her proper place in international trade. 
Provided that she fulfills the conditions of the 
peace treaty, and provided also that she gives up 
the policy of aggression and greed which have 
characterized her methods in business as well as 
politics, the intention of the Powers is that Germany 
shall enjoy equitable treatment in respect of the 
purchase of raw materials and the sale of merchan- 
dise, allowance being made for temporary measures 
taken in the interest of the countries devastated and 
weakened by Germany's act." 

The conditions governing reparations limit the 
sums payable by Germany to the amount of dam- 
ages caused to the civil populations. They involve 
no act of interference in the interior life of Germany. 

[24] 



ECONOMIC ASPECT OF THE TREATY 

The object of the treaty being to rehabilitate, so 
far as possible, the civil victims, and to restore their 
property to a pre-war condition, there has been 
created a permanent organization whose task con- 
sists of keeping account of this huge operation, 
regulating the infinitely varied factors entering into 
the matter of restitution in kind or in cash, super- 
vising, day by day and hour by hour, the execution 
of the numerous clauses of the most complicated 
international instrument that has been known in 
diplomatic history. This organization is the Repa- 
rations Commission. 

777. The Reparations Commission 

The Reparations Commission has in a general 
way the broadest powers of control and action in 
respect of the reparations problem; its scope in- 
cludes the interpretation of the terms of the treaty. 
It must conform to the following provisions: 

Every fraction of the total amount of verified 
credits which shall remain unpaid, whether in gold, 
ships, securities and merchandise, or otherwise, 
shall be guaranteed by Germany through handing 
over an equivalent amount of bonds or other securi- 
ties by way of collateral, for the fraction of the debt 
involved. 

In order to facilitate and carry out the immediate 
restoration of the economic life of the Allied and 
Associated Nations, the Commission shall receive 
from Germany, as guarantee and acknowledgment 
of her debt, a first deposit of gold bearer bonds, 

[25] 



THE PEACE OF JUSTICE 

exempt from taxes of every kind which may be 
imposed by the German Empire or states. These 
bonds shall be handed over on account, the gold 
mark to be converted at the option of the creditors 
into pounds sterling payable in London, gold dollars 
payable in New York, gold francs payable in Paris 
or gold lire payable in Rome. 

Of these bonds 20 billions shall be issued at once, 
maturing at the latest on May 1st, 192 1, without 
interest. To amortizing these bonds, shall be ap- 
plied particularly the deposits which Germany has 
undertaken to make (Article 235) in gold, mer- 
chandise, ships and securities, deduction being made 
of the sums allocated to the repayment of expenses 
of maintaining the troops of occupation and to the 
payment of expenses incurred for food and materials 
required by reason of this occupation. Bonds 
which have not been amortized by May 1st, 1921, 
shall be exchanged for bonds of the type specified 
hereunder. 

Immediate issue shall be made of bonds for 
40 billion gold marks, bearing interest at 2]4 per 
cent from 1921 to 1926, and from the year 1926 
at 5 per cent, with an addition of 1 per cent for 
amortization of the principal. 

At the same time there shall be handed over a 
written undertaking to issue, by way of a new de- 
posit — but only after the Commission has been 
satisfied that Germany can assure the payment of 
the interest and amortization fund for the said 
bonds — 40 billion marks in 5 per cent gold bearer 
bonds. 

[26] 



ECONOMIC ASPECT OF THE TREATY 

Other issues, by way of acknowledgment, indebted- 
ness and security, may be demanded on terms which 
the Commission may determine later. 

The Reparations Commission has opened an ac- 
count for each of the interested powers. It hands 
over to each a certificate stating that it holds for 
that power German bonds or other security given 
by Germany on account of her debt for reparations. 
These certificates are drawn to order and may be 
transferred after indorsement. The German Gov- 
ernment will be debited, from May 1st, 1921, with 
the interest, provisionally fixed at 5 per cent, on the 
amount of its debt, as determined by the Commission. 
In case of failure on the part of Germany to fulfill 
any one of her obligations entailed by this section 
of the treaty, the Commission shall notify all the 
interested powers of that failure. The steps which 
these powers shall then take, and which Germany 
has agreed not to consider as acts of hostility, may 
include prohibiting acts and economic and financial 

reprisals. 

The payments, which must be made in gold or its 
equivalent, may be accepted by the Commission in 
the form of movable or immovable property, enter- 
prises, rights and concessions in German territory 
or outside her territory, ships, bonds, stocks or 
securities of any other nature, or in coinage of Ger- 
many or other states, the value of such to be de- 
termined at a just and equitable rate by the Com- 
mission. The Commission shall be dissolved when 
Germany and her allies have paid off in full the 

sums due by them. 

[27] 



THE PEACE OF JUSTICE 

IV. Direct Application of Germany's Economic 
Resources to the Restoration o] the Invaded Regions 

There are perhaps no conditions of the treaty in 
which its true spirit appears more clearly than in 
those dealing with the direct application of the 
economic resources of Germany to the material 
restoration of the invaded regions. To this end the 
Allied and Associated Powers are to communicate 
to the Reparations Commission lists indicating the 
number of animals, machines, equipment, lathes 
and similar articles of commercial nature which have 
been seized, worn out or destroyed by Germany, or 
destroyed as a direct consequence of military opera- 
tions, and which the powers wish to see replaced by 
equivalent animals or articles from German terri- 
tory. The same powers shall indicate the material 
necessary for reconstruction, machines, heating 
apparatus, furniture and other articles, which shall 
upon their demand be produced and manufactured 
in Germany and delivered for the reconstruction 
of the invaded regions. 

The spirit of moderation, which is the spirit of the 
treaty, inspired the stipulation by virtue of which it 
is incumbent upon the Commission to find out in 
what measure Germany is capable of furnishing these 
materials and animals. It is enjoined upon the 
Commission to take account of the internal needs of 
Germany in relation to the maintenance of her social 
and economic life. It shall also take stock of the 
prices and dates at which the articles in question can 
be obtained in the Allied and Associated Countries 

[28] 



ECONOMIC ASPECT OF THE TREATY 

and compare them with those applicable to the 
corresponding German articles. It is specified textu- 
ally that the general interest which the allied and 
associated governments have is that the industrial 
life of Germany shall not be disorganized to the 
extent of compromising its capacity to fulfill the 
other acts of reparation demanded of her. There 
shall be demanded of Germany machines, equip- 
ment, lathes and other similar articles of industrial 
use only if stock of such articles is available and for 
sale. On the other hand, the demands for such 
articles shall not exceed 30 per cent of the number 
of such articles in use in any German plant. The 
Commission shall give representatives of the German 
government the opportunity to be heard with regard 
to their capacity to furnish the said materials, 
animals or articles. 

Who would dispute the leniency of all these clauses, 
carefully studied and framed so that what must be 
restored by Germany to the Allies shall not cripple 
the resumption of normal economic life in Germany? 
Constant care for justice appears in the clauses 
relative to estimating the value of the payments in 
kind to be made by the Germans. The Commission 
is to determine this value. The Allied and Asso- 
ciated Governments which are to receive these goods 
accept the condition that they shall be debited with 
the value thereof and acknowledge that the corre- 
sponding sum shall be considered to have been paid. 
Precaution is carried even to ordering the Commis- 
sion to see that the sums carried to the credit of 
Germany shall represent the normal value of the 

[29] 



THE PEACE OF JUSTICE 

work involved, of the materials delivered by Ger- 
many, and that the amount of the claim made by 
the interested power shall be abated to the extent 
of what that power shall have received. 

Germany has agreed to deliver coal to the Allies 
as follows : 7 million tons per year to France for ten 
years; 8 million tons per year for ten years to 
Belgium; to Italy quantities increasing from 4^ 
to %yi million tons for ten years; and finally to the 
Grand Duchy of Luxembourg a quantity equal to 
that which Germany sold to it before 1914. The 
whole forms a total of about 25 million tons pe- 
year. In 191 3 the German coal production war 
191 million tons, of which 19 were consumed at ths 
mine and 33 exported, leaving 139 million tons foe 
domestic requirements. Before the war France rer 
quired 60 million tons annually and imported one- 
third. French production of 40 million tons has 
been reduced by half by the devastations. Thus 
we have now only one-third of the fuel we need. 
Did we go beyond our rights in requiring Germany 
to deliver quantities which will not be sufficient, 
even if fully delivered, to put us back in the position 
in which we were in 191 3 ? With the 20 million tons 
which Germany must deliver to us for some years 
to replace the production of the devastated mines 
we shall be receiving in all only 27 million tpns from 
Germany, which added to our production of 20 
million tons gives only 47 million tons, namely, 
one-fifth less than our 191 3 consumption. Germany 
by going to work and increasing her production 
can meet both her requirements and her obligations. 

[30] 



ECONOMIC ASPECT OF THE TREATY 

In addition to coal, Germany is bound to supply 
France for three years with only 3° thousand 
tons of sulphate of ammonia, 35 thousand tons of 
benzol, 50 thousand tons of coal tar, the latter being 
replaceable by distillation products, such as light 
oils, heavy oils, naphthalene or resin. The price 
shall be that which would be paid by German buyers. 
Germany is to give the Reparations Commission 
a sixty-day option on the delivery of dyestuffs and 
pharmaceutical products to the extent of half the 
quantity of such products available in Germany. 
Germany is further to give an option on the delivery, 
every half-year, of all dyestuffs and all pharmaceu- 
tical products to the extent of one quarter of the 
output for the preceding half-year. The prices shall 
be fixed by the Reparations Commission on the basis 
of the net pre-war export prices and the subsequent 
variations in net prices, or on the basis of the lowest 
price paid by any other buyer. 

All these clauses, it will be seen, bind Germany 
only for a very short period and have no other 
object than to keep the Allies provided with materials 
in a measure which will not interfere with normal 
German industrial activity. Proper prices are as- 
sured the German manufacturers, since even for 
existing stocks, the cost of producing which was 
certainly far lower than present rates, allowance is 
made for "subsequent variations in net price. " 

Germany renounces, in her own name, and in the 
name of her nationals, in favor of the principal 
Allied and Associated Powers, all rights, titles or 
privileges whatever which she possesses in respect 

[31] 



THE PEACE OF JUSTICE 

of the cables or portions of cables, Emden-Vigo, 
Emden-Brest, Emden-Teneriffe, Emden-Azores, 
Azores-New York, Teneriffe-Monrovia, Monrovia- 
Lome, Lome-Duale, Monrovia-Pernambuco, Con- 
stantinople-Constanza, Yap-Guam, Yap-Menado 
(Celibate Islands). The treaty specifies for each 
of these cables the sections given up by Germany. 
The value of the cables, in so far as they belong to 
private interests, will be carried to the credit of 
Germany under the head of reparations. 

V, Naval Clauses 

The initial principle laid down in the naval clauses 
of the treaty is still the same — namely, reparation, 
as far as possible, of the damages caused. " Ger- 
many recognizes the right of the Allied and Asso- 
ciated Powers to the replacement, ton for ton (dead- 
weight) and class for class, of all the ships, freight 
boats and fishing boats lost or damaged by act of 
war." Nevertheless, although the ships now in the 
possession of Germany represent a tonnage far 
inferior to that lost by the Allied and Associated 
Powers through Germany's acts of aggression, the 
right proclaimed above will be exercised only to the 
following extent: "The German Government yields 
to the Allied and Associated Governments the 
possession of all merchant ships, of 1600 deadweight 
tons and more, belonging to those under its juris- 
diction, half in tonnage of vessels whose deadweight 
tonnage is between 1000 and 1600 tons and a quarter 
in tonnage of steam trawlers, and a quarter in 

[32] 



ECONOMIC ASPECT OF THE TREATY 

tonnage of other fishing boats." These vessels and 
boats comprise all those which fly or have the right 
to fly the German flag, belonging to a German sub- 
ject, to a German firm or company or to a firm or 
company of another country than the Allied and 
Associated Powers and under the control and admin- 
istration of German subjects, or actually under 
construction in Germany or in other countries than 
the Allied and Associated Countries for the account 
of Germans. 

The German Government shall deliver, for every 
vessel, to the Reparations Commission, a bill of 
sale or other deed of ownership establishing the 
transfer to the Commission of the full possession 
of the ship, free from all preferences, mortgages or 
other liens whatsoever, and shall take every step 
to assure the placing of these vessels at the disposal 
of the Commission. 

Germany has undertaken to restore to the Allied 
and Associated Powers all other vessels and barges 
for inland navigation which, since August ist, 1914, 
came into the possession of its subjects in any manner 
whatever. So as to compensate the losses of inland 
tonnage suffered during the war by the Allied and 
Associated Powers, which are not covered by the 
foregoing clauses, Germany shall cede a part of her 
inland tonnage, to the extent of the total of these 
losses, but not more than one fifth of the total of such 
inland tonnage as it existed on November nth, 1918. 
Furthermore, Germany undertakes to construct 
for the Allies, within five years, the ships which 
shall be demanded of her, to the extent of 200,000 

[33] 



THE PEACE OF JUSTICE 

tons a year, the value of these ships to be deducted 
from the amount of reparations due by Germany. 

The tonnage which is thus to be restored to us 
represents only a small proportion of that which 
was torpedoed by Germany, and only a very modest 
fraction of that which would be necessary to us in 
order that we should regain the place we formerly 
held in respect of merchant ships. 

VI. Financial Clauses 

Subject to the derogations which might be granted 
by the Reparations Commission a first preference 
is established upon all property and resources of 
the German Empire and States for the settlement 
of reparations and other charges arising out of the 
treaty. Nevertheless, an embargo on the exporta- 
tion of gold or disposition of gold is specified only 
up to May ist, 1921. 

The cost of maintaining the Allied and Associated 
Armies in the occupied territories is to be borne by 
Germany from the date of the armistice. That is a 
clause which is customary in similar cases. The 
repayment of costs corresponding to purchases or 
requisitions made by the Allied and Associated 
Governments shall be made in marks at the rate of 
exchange; other costs to be paid in gold marks. 

There shall be carried to the credit of the German 
Government, as a deduction from the sums which it 
owes, the value of material delivered, which the 
Reparations Commission shall deem to be, by reason 

[34] 



ECONOMIC ASPECT OF THE TREATY 

of its non-military character, properly creditable to 
the German Government. 

The powers to which German territory shall be 
ceded shall assume part of the debt to be paid by 
the German Empire, as it was constituted on August 
1st, 1914, according to the ratio between the revenue 
of the territory ceded and that of the total revenue 
of the Empire. That basis would appear to be the 
proper gauge of the capacity for revenue-yield of 
the various territories ceded. These same powers 
assume a proportional share, calculated in the same 
manner, of the debt of the particular German state 
to which the ceded territory belonged. Alsace- 
Lorraine is naturally exempted from this stipulation. 
When Germany took this territory from France in 
1871 it assumed no share of the French debt. With 
regard to Poland, the fraction of the debt which the 
Reparations Commission shall deem to have been 
incurred through the steps taken by the German 
and Prussian Governments for the German "col- 
onization" of Poland will not be chargeable to 
Poland. It is needless to dwell upon the fairness 
of this stipulation, for it would have been a strange 
thing to impose on a nation a burden of expenses 
incurred in the hope of annihilating that nation. 

The powers to whom German territory is ceded 
will acquire all property and goods, in these terri- 
tories, belonging to the German Empire or States. 
The value of these acquisitions will be paid by the 
power receiving the ceded territory to the Repara- 
tions Commission to be carried to the credit of the 
German Government, to be deducted from the sums 

[35] 



THE PEACE OF JUSTICE 

due by it for reparations. Nothing could be more 
equitable. The German States could not continue 
to hold property in the territories which they were 
losing. They receive the price of what was given 
up. Nevertheless, considering the manner in which 
Alsace-Lorraine was taken from France, that ter- 
ritory will be exempted from all payment to Ger- 
many for the value of the goods, in Alsace-Lorraine, 
belonging to the German Empire or States. Bel- 
gium also will have nothing to pay on property 
situated on territory ceded to her and belonging to 
the German Empire or States. 

Germany renounces all representation or partici- 
pation given to her by treaties, conventions or 
agreements of any kind, whether for herself or her 
subjects, in the administration or control of state 
commissions, agencies or banks and in all other 
international controlling or administrative organiza- 
tions, whether financial or economic, whose activities 
are in any of the Allied and Associated Countries, 
in Austria, Hungary, Bulgaria, or Turkey, or in any 
dependencies of the above-named states, or in the 
former Russian Empire. 

The Reparations Commission shall within a year's 
time be empowered to demand that Germany 
acquire all German rights or interests in any public 
utility or other enterprise in Russia, China, Austria, 
Hungary, Bulgaria, Turkey or any territory which, 
having belonged to Germany or her allies, is to 
be ceded or administered by a mandatory. These 
rights or interests shall be transferred to the Repara- 
tions Commission. Germany shall indemnify these 

[36] 



ECONOMIC ASPECT OF THE TREATY 

private German interests thus dispossessed. The 
Reparations Commission shall credit Germany with 
an amount equivalent to the value of the rights thus 
transferred. Germany shall transfer to the Allied 
and Associated Powers all her Austrian, Hungarian, 
Bulgarian and Turkish credits, and particularly 
those which arose out of the engagements entered 
into by Germany with these powers during the war. 
Is it necessary to emphasize the common motive 
of these various financial clauses which we have 
just cited? Their underlying principle is that of 
giving Germany the means to begin meeting her 
debts to the Allies, or, in other words, to make 
reparation. The payments in kind which she is 
called upon to make are all to be carried to the 
credit of an account which is opened in the name of 
Germany and is to be closed on the day when 
Germany, through the numerous methods indicated, 
shall have placed in the treasuries of the Allies 
the sum total of her obligations representing only 
reparation of the damages she has caused or restora- 
tion of what she has taken. In this latter category 
are included the obligations assumed by Germany to 
transfer, to authorities who shall be indicated, the 
amount in gold which had to be deposited in the 
Reichsbank in the name of the administrative 
council of the Turkish public debt, as security for 
the first issue of paper money by the Turkish Gov- 
ernment. The same applies to the obligation as- 
sumed by Germany to make twelve annual payments 
in gold as called for on the face of the German 
Treasury bonds deposited in the name of the admin- 

[37] 



THE PEACE OF JUSTICE 

istrative council of the Turkish debt as security for 
the second and subsequent issues of Turkish paper 
money. In the same class likewise must be con- 
sidered Germany's engagement to restore: I. The 
gold deposited in the Reichsbank as security for the 
advance, sanctioned on May 5th, 191 5, by the 
administrative council of the Turkish debt, to the 
Ottoman Government; 2. the gold which had been 
transferred to Germany on the occasion of her loans 
to the Austro-Hungarian Government; 3. the gold 
and all other values, in cash or negotiable securities, 
of which Germany gained possession by the treaties 
of Bucharest and Brest-Litovsk. 

It is a matter of record that the German au- 
thorities had succeeded, through various pretexts, 
in concentrating in Berlin nearly all the gold which 
Germany's allies possessed. To demand the res- 
toration of a deposit has never been considered an 
act either of violence or injustice toward those 
having received such a deposit. 

VII. Economic Clauses 

Part X of the Treaty of Versailles contains the 
economic clauses. They relate to customs, naviga- 
tion, unfair competition and the treatment of 
nationals of the Allied and Associated Powers. 

Germany undertakes not to tax merchandise, raw 
or manufactured products, of any of the Allied or 
Associated Countries imported into German terri- 
tory with other or higher duties or charges than 
similar merchandise, raw or manufactured products, 

[38] 



ECONOMIC ASPECT OF THE TREATY 

of any other country. Germany shall not maintain 
or impose any embargo or restriction upon the 
importation of merchandise or material of any of the 
Allied or Associated Countries which are not equally 
applicable to similar importations from other coun- 
tries. Germany undertakes to make no discrimina- 
tion against the commerce of the Allied or Associated 
Countries by indirect means, such as those arising 
from customs regulations or methods of procedure 
of checking or examination or from the terms of 
duty payments or methods of classification or inter- 
pretation of tariffs or, further, by the use of monopo- 
lies. Equivalent undertakings are given by Ger- 
many with regard to merchandise and products of 
exportation from her territory. 

Every favor, immunity or privilege in respect of 
importation, exportation or transportation of mer- 
chandise which shall be granted by Germany to any 
country shall be simultaneously and unconditionally 
extended, automatically and without compensation, 
to all the Allied and Associated Countries. 

For a period of five years all raw and manufactured 
products of the territories of Alsace and Lorraine, 
restored to France, shall be allowed free customs 
entry into German territory, but the respective 
quantities of each product shall not exceed the 
average quantities sent from those territories into 
Germany during the years 191 1 to 1913. For five 
years also Germany shall allow free export and re- 
importation of threads, cloths and other textile 
materials or products from Germany into the 
territories of Alsace and Lorraine to undergo proc- 

[39] 



THE PEACE OF JUSTICE 

esses there, such as bleaching, dyeing, printing, 
mercerizing, gauzing, retwisting or finishing. For 
three years, in the same manner, products from 
Polish territory which before the war was incor- 
porated in Germany shall be received free of duty 
by Germany to the extent of the mean annual 
quantities thus shipped between 191 1 and 1913. 
The principal Allied and Associated Powers reserve 
the right to impose upon Germany the obligation 
of receiving free of duty products of the Grand 
Duchy of Luxembourg. 

All these provisions explain themselves. It is 
evident that it was impossible to close the outlets 
which certain industries had for a long period been 
obliged to use. It is astonishing, rather, that such 
a brief period should have been fixed for the process 
of establishing the necessary industrial equilibrium 
in other directions. These provisions have no other 
object than to save the industries of Alsace and 
Poland from ruin. 

During the six months following the date of the 
treaty's going into effect the duties imposed by 
Germany upon importations from any of the Allied 
or Associated Countries shall not be higher than 
those applying to the goods imported from the most 
favored countries at the date of July 31st, 1914. 
This provision shall continue to be in force for the 
thirty subsequent months, but only in respect of 
certain determined products. Finally, the Allied 
and Associated Powers reserve the right to apply 
a special customs tariff to the German territory 
occupied by their armies if they should deem such 

[40] 



ECONOMIC ASPECT OF THE TREATY 

steps necessary to safeguard the economic interests 
of these territories. 

Nothing in these various provisions justifies the 
accusation that the victors wished to prevent 
the vanquished from existing. The majority of the 
provisions are nothing more than the development 
of the most favored nation clause which was inserted 
in the Treaty of Frankfort of 1871. We have only 
profited by the experience of nearly half a century, 
during which time we saw Germany changing the 
text by surreptitiously introducing subtle distinc- 
tions and carefully devised regulations. We have 
attempted, by means of suitable stipulations, to 
guard against the repetition of such frauds. 

Germany binds herself to take all legislative and 
administrative measures to guarantee raw or manu- 
factured products of the Allied and Associated 
Powers against any form of unfair competition in 
commercial transactions. She obligates herself to 
restrict and prohibit the importation and exporta- 
tion, as well as the manufacture, distribution and 
sale of all products bearing, either on the articles 
themselves or the packing, any brands, names, 
inscriptions or marks whatsoever, involving false 
indications as to their origin, species, nature or 
specific qualities. Upon condition that equivalent 
treatment be granted to her on this point, Germany 
undertakes to conform to the laws and regulations 
in force in any of the Allied or Associated Countries 
which establish the right to local option with re- 
gard to wines and spirits. The importation, ex- 
portation, manufacture, distribution and sale of 

[41] 



THE PEACE OF JUSTICE 

products covered by such local option, contrary 
to the laws above mentioned, shall be forbidden by 
Germany. 

Can Germany complain of such provisions which 
are confined to defending the legitimate rights of 
manufacturers and producers? Can she make any 
objection whatever when equivalent treatment is 
accorded to her? 

The treaty is no less equitable in so far as it 
concerns nationals of the Allied and Associated 
Powers. All that it demands of Germany is that 
she shall not impose upon them, in relation to the 
exercise of trades, professions, commerce and in- 
dustry, any exclusion which would not apply 
equally to all foreigners; that she shall subject 
them to no regulation which would violate this 
equality and that she shall impose on them no 
higher taxes than she imposes on her own nationals. 

The settlement of debts and credits between 
nationals of the contracting powers and those of an 
adverse power must be made through the inter- 
mediary of offices of verification and compensation 
which shall be established by each of the contracting 
parties. There shall be settled in the same manner 
the payment of interest which accrued before and 
during the war, amounts of principal repayable 
before and during the war, due to the nationals 
of one of the contracting powers, representing values 
issued by an adverse power, provided that the pay- 
ment of that interest or that capital to the nationals 
of that power or to neutrals shall not have been 
suspended during the war. Each of the contracting 

[42] 



ECONOMIC ASPECT OF THE TREATY 

parties forbids any communication between the 
interested parties relative to the settlement of the 
said debts otherwise than through the intermediary 
of the offices of verification and compensation. 
Each contracting party shall be responsible for the 
payment of the said debts of its nationals except 
those of the inhabitants of the invaded regions. 
The high contracting parties shall take all steps 
to prosecute and punish collusion between enemy 
creditors and debtors. The offices shall communi- 
cate all signs and information which come to their 
notice and may aid in the discovery of such collu- 
sion. When a debt is recognized the debit office 
shall immediately credit the credit office with its 
amount. The balance of the transactions between 
the offices takes place every month and a settlement 
is made by the debtor state. However, the bal- 
ances due by the Allied and Associated Powers 
shall be retained until integral payment of the sums 
due to them by reason of the war shall have been 
made. Without entering into further details of the 
articles which minutely regulate the procedure of 
the compensation offices, we have said enough to 
show that Germany is treated in this matter on an 
equal footing and that her creditor or debtor na- 
tionals 'will see their accounts settled just as the 
French or other Allies. 

The special war measures adopted by Germany in 
respect of the goods, rights or interests of nationals 
of the Allied and Associated Powers shall be re- 
voked. These powers have the right to retain and 
liquidate all goods, rights and interests of German 

[43] 



THE PEACE OF JUSTICE 

nationals. The latter shall be indemnified therefor 
by their governments. 

Contracts concluded between enemies shall be 
considered as null and void, except in the case of 
debts or other obligations arising out of the fulfill- 
ment of any part of such contracts or any payment 
made in accordance with them. If, however, the 
Allied and Associated Powers shall demand the 
maintenance of any contracts in the general interest, 
such contracts shall be carried out. Upon the 
territory of the high contracting parties, in relations 
between enemies all periods of statutes of limita- 
tions, laches or foreclosure shall be suspended for the 
duration of the war and shall only be put into effect 
again three months after the treaty shall have be- 
come operative. When a contract between enemies 
shall have been broken the party injured shall have 
the power to appeal to a mixed tribunal of arbitra- 
tion, to obtain redress. This tribunal shall be 
composed of any one of the Allied or Associated 
Powers on one hand and Germany on the other. 
Each tribunal shall be composed of three members. 
Each of the interested governments shall appoint 
one member and the chairman shall be chosen after 
agreement between the two interested governments, 
or, in case such an agreement shall not be arrived at, 
by the League of Nations Here again is absolute 
equality between Germany and ourselves. 

Industrial, literary or artistic rights shall be re- 
established or restored in favor of those who benefited 
therefrom at the time of the outbreak of hostilities. 
Each of the Allied or Associated Powers reserves the 

[44] 



ECONOMIC ASPECT OF THE TREATY 

option of bringing to bear upon such industrial, 
literary or artistic rights which may have been 
acquired by German nationals such restrictions or 
conditions as shall be deemed necessary to safeguard 
the national defense or the public weal, or of assuring 
equitable treatment by Germany of industrial, 
literary or artistic rights possessed within German 
territory by nationals of the Allied or Associated 
Powers, or to guarantee the complete fulfillment of 
all obligations contracted by Germany by virtue 
of the treaty. In such cases reasonable indemnities 
or returns will be granted and these will be allocated 
in the same manner as all other sums due to German 
nationals. 

No action may be brought by German nationals 
or by nationals of the Allied or Associated Powers 
by reason of acts which may have arisen on the terri- 
tory of the other party between the declaration of 
war and the time when the treaty becomes operative, 
and which may have been considered to have in- 
fringed industrial, literary or artistic rights. Here 
once more we find equality between the victors 
and the vanquished. 

VIII. Transportation 

So far as transportation is concerned, Germany 
undertakes to grant freedom of transit through her 
territories on the route most convenient for inter- 
national transit, either by rail, navigable water- 
way or canal, to persons, goods, vessels, carriages, 
wagons and mails coming from or going to the 

[45] 



THE PEACE OF JUSTICE 

territories of any of the Allied and Associated 
Powers. Such persons, goods, etc., shall not be 
subjected to any transit duty or to any undue delays 
or restrictions, and shall be entitled in Germany to 
national treatment as regards charges, facilities and 
all other matters. Goods in transit shall be exempt 
from all customs or other similar duties. All 
charges imposed on transport in transit shall be 
reasonable, having regard to the conditions of the 
traffic. No charge, facility or restriction shall depend 
directly or indirectly on the ownership or on the 
nationality of the ship or other means of transport 
on which any part of the through journey has been 
or is to be accomplished. Germany undertakes 
particularly to make no discrimination or preference, 
direct or indirect, in the duties, charges and prohi- 
bitions relating to importations into or exportations 
from her territories. 

At this point it is interesting to recall an article 
of the Treaty of Versailles which has not been much 
discussed in German or Germanophile polemics, but 
which bears more than any other the impress of that 
spirit of extreme moderation with which the Allies 
have at all times been inspired. This is Article 378, 
which declares: "The stipulations in Articles 321 to 
330? 33 2 > 365 to 369 shall be subject to revision by 
the Council of the League of Nations at any time 
after five years from the coming into force of the 
present treaty. Failing such revision, no Allied or 
Associated Power can claim after the expiration of 
the above period of five years the benefit of any of 
the stipulations in the articles enumerated above 

[46] 



ECONOMIC ASPECT OF THE TREATY 

on behalf of any portion of its territories in which 
reciprocity is not accorded in respect of such stipula- 
tions. The period of five years during which 
reciprocity cannot be demanded may be prolonged 
by the Council of the League of Nations." 

The articles referred to include conditions govern- 
ing ports, waterways and railroads which we have 
summarized. They assure free distribution of mer- 
chandise, freedom of navigation and railroad freight. 
Now what is the significance of Article 378? It is, 
for instance, that Algerian products will no longer, 
after 1925, enjoy equality of transportation treatment 
in Germany unless German merchandise enjoys 
similar treatment on Algerian railroads. And the 
period of non-reciprocity can only be extended by the 
Council of the League of Nations. Moreover, the 
deliberations of this council, according to Article 5 
of the Treaty of Versailles, shall be reached unani- 
mously. The representative of a single State there- 
fore will have the power to refuse us prerogatives 
which the other powers will have granted to be 
necessary. Such are the consequences of these 
conditions which evidently constitute a distinct 
favor to the vanquished nations. 

IX. General Considerations 

We must again refer to the memorable letter of 
June 16th, 1919, addressed to the President of the 
German delegation, in which Mr. Clemenceau, 
President of the Supreme Council, summarized in a 
most striking manner the history of the war, and 

[47] 



THE PEACE OF JUSTICE 

placed on record the most powerful and irrefutable 
explanation of the Treaty of Versailles. " Justice," 
he wrote, "is the only possible basis for settling the 
accounts of this terrible war. Justice is what the 
German delegation is asking for, and what has been 
promised to Germany. Justice Germany shall have. 
But this justice will have to be a justice for all. It 
will have to be a justice for the dead, for the wounded, 
for the orphans, for all those who are in mourning. 
. . . Justice will have to be done to the peoples who 
are tottering to-day beneath a burden of war debts 
amounting to more than 750 billion francs, which 
these peoples accepted in order to safeguard their 
liberty. Justice must be done to the millions of 
human beings whose hearths, whose land, whose 
ships and whose personal property have been pil- 
laged and destroyed by German savagery. That 
is why the Allied and Associated Powers insistently 
declared that Germany must, as a fundamental 
condition of the Treaty, undertake reparations to 
the extreme limit of her capacity, for reparation of the 
wrongs which she has caused is the essence of 
justice." 

Mr. Clemenceau then explained the origin of the 
reparation clauses which limit the sum to be paid by 
Germany to the amount, clearly justified by the 
terms of the armistice, of the damages caused 
through German aggression to the civil population 
of the Allies. The treaty has for its aim to make the 
reparation payments to which Germany is bound as 
easy as possible. The Allied and Associated Powers 
have recognized the advantages to be derived from 

[48] 



ECONOMIC ASPECT OF THE TREATY 

fixing the amount to be paid as early as possible. 
But this amount could not be fixed at the time when 
the treaty was signed, for the extent of the damages 
and the cost of reparations were not yet established. 
The powers then consented to grant Germany all 
necessary and reasonable facilities to allow her to 
estimate the total amount of devastation and dam- 
ages, and to present proposals within four months 
from the signing of the treaty with a view to settling 
the demands which she must meet in each category 
of damages for which she is responsible. If an 
agreement had been reached, the amount due by 
Germany would have been fixed. Since Germany 
did not take advantage, within the time agreed, of 
the option which had been given to her, the clauses 
of the treaty will be carried out. The reader is in a 
position to realize what these clauses are. All 
these clauses being dependent upon the principle 
of reparation which is set forth at the beginning 
of the treaty, they have three primary objects: 
I. to obtain payment to the Allies of the amounts to 
which they are entitled; to restore to them the 
industrial and agricultural equipment which has 
been taken from them: and for the attainment of 
these ends, to increase Germany's means of payment, 
restitution and compensation; 2. to guarantee to 
the nationals of the Allied powers equitable treat- 
ment in their economic relations with Germany; 
3. to assure freedom of transportation.; In many 
cases reciprocity, whether immediate or to be ar- 
ranged within a short time, has been stipulated in 
favor of the Germans. 

[49] 



THE PEACE OF JUSTICE 

While pointing out that the Treaty of Versailles 
falls far short of giving satisfaction in every respect, 
we recognize that, in view of the variety and conflict 
of interests, it constitutes an acceptable solution of 
the majority of problems which it was intended to 
solve. From an economic point of view, it is the 
expression of a careful decision not to use undue 
haste in reaching a solution of the problems in- 
volved, and to temper the legitimate reparation 
demands to the capacity of the debtor. It is not 
the debtor who can complain of the conditions 
which have been determined upon, but, on the 
contrary, certain creditors whose own distress gives 
them a good right to be impatient. To justify the 
state of mind of these creditors, we shall only have 
to submit to the reader the picture of ruined Ypres 
upon the territory which was invaded, occupied and 
then destroyed by the Germans. We must also set 
forth the financial situation of the Allies, which is 
not only a result of the war, but has been terribly 
aggravated by the manner in which that war was 
waged. Half of the charges with which the French 
taxpayer is now burdened arise from the systematic 
destruction of houses, factories, mines and trees, 
which was carried out by the German armies in 
contravention of the laws of warfare. 



[50] 



CHAPTER III 
Germany's capacity to pay 

/. Germany's Wealth Before the War* 

The Germans filled the world with their lamenta- 
tions concerning the Treaty of Versailles, which they 
pretended imposed upon them a task beyond their 
strength. If, however, we look back a few years and 
if we recall the years preceding the war, we shall find 
ourselves faced with an attitude altogether different, 
and we shall observe quite another estimate of their 
financial power. At that time the statesmen, the 
bankers, the economists beyond the Rhine vied with 
each other in boasting of their country's wealth, 
emphasizing with pride its marvelous development. 
They pointed to the Rhenish and Silesian mills 
which were rivaling England in the markets of 
the world and allowed that the United States only 
was their superior. The Berlin banks stepped from 
success to success, absorbing the old provincial 
firms, placing their enormous means at the service 
of industry and commerce, spreading outward in 
both hemispheres, founding branches and associa- 
tions in all the principal centers of the world; the 
great shipping companies of Hamburg and Bremen 

[51] 



THE PEACE OF JUSTICE 

vied with the British ship-owners, organizing their 
lines upon the seven seas, seeking passenger and 
freight traffic even in French and English ports. 

The statisticians gloated over their estimates of 
Germany's wealth in hundred-billion figures. The 
Imperial Bank, in 1900, at the time of the twenty- 
fifth anniversary of its foundation, published a vol- 
ume in which it arrayed smugly the figures which 
bore witness to its progress, the services which it ren- 
dered to the country particularly in the achievement 
of monetary reform, organization of money-transfer 
systems all over Germany, the regulating of discount 
rates. The rates of exchange with foreign countries, 
particularly with France, England and North 
America, were maintained approximately at par; 
gold circulated freely in Germany; the Prussians 
and other German subjects traveled extensively, 
making themselves very obvious with their somewhat 
noisy luxury in watering places and other resorts. 

In a study published in 191 3 under the significant 
title, "The Excellent Situation of the German 
People ,, {Deutschlands Folks Wohlstand), Dr. Karl 
Helferich, former director of the Deutsche Bank, 
who at the beginning of the war was Minister of the 
Interior, then Minister of Finance in 191 7 and Vice- 
Chancellor of the Empire, vaunted in high-sounding 
terms the economic power of his country. 

Studying the elements of this prosperity, the 
author first of all recalled the one which is at the 
base of all, namely: population. The excess of 
births over deaths in Germany was thirteen per 
thousand in 1913; the population, which in 1870 

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GERMANY'S CAPACITY TO PAY 

scarcely exceeded that of France, had increased by 
two-thirds and on the eve of the war surpassed 
66 millions. Industrial progress had continued with 
extraordinary intensity; from 1882 to 1907 the 
power generated by steam engines in Germany had 
quadrupled, advancing from 2 million to almost 8 
million horse power. But that is not the only 
source of energy which modern factories employ. 
The factories operated by electricity and the carry- 
ing of power from long distances continued to 
multiply in Germany in the same manner as gas 
motors and gasoline motors for automobiles and 
aeroplanes. The construction of machines was a 
flourishing industry. Herr Helferich complacently 
gave a list of all those machines which were manu- 
factured in Germany itself; machines for mining, for 
metallurgical, textile and paper industries, agricul- 
tural implements and machines employed in indus- 
tries depending on agriculture such as distilleries, 
breweries and sugar refineries. He showed the part 
which was played by his country in the theory and 
practice of fertilizing. He recalled the wealth which 
existed in a deposit of potash of which 11 million 
tons mined in 191 2 represented 230 million francs 
in value. 

Germany, with her professional schools, her well- 
disciplined workmen, gave the impression of an 
important productive force. She counted in 1907 
nearly 3^ million factories, 3 million of which 
employed from 1 to 5 persons, 267,000 of average 
importance (from 6 to 50 persons) and 32,000 
employing 51 hands or more. Among the latter, 

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500 had a personnel of more than 1,000 men, and 
comprised altogether nearly a million employees. 
This development of large factories was based on the 
development of available capital which at the same 
time favored the establishment of an ever-increasing 
number of companies. In 1886 there existed in 
Germany only 2,143 joint stock companies, with an 
aggregate capital of 6 billion francs. In 19 12 
4,712 were listed with a capital of 19 billion francs. 
Funds on deposit in the banks at the former date 
exceeded 12 billion francs; 4 billions deposited with 
industrial associations; 22 billions in savings banks. 
Within a quarter of a century the total of these 
deposits had quintupled. 

With regard to agriculture, production had made 
enormous strides; from 13 quintals of wheat to the 
hectare in 1885, it had increased to 20 quintals in 1912. 
With regard to the cultivation of rye, although 
the land covered by this crop had only increased by 
6% the production advanced by 88%. In gross 
output Germany led all nations in the cultivation 
of potatoes (50 million tons). She came third in the 
output of cereals (15 million tons). Her production 
of beet root reached 15 million tons, which yielded 
2^2 million tons of sugar. The number of animals, 
with the exception of sheep, had considerably in- 
creased. The number of cattle and horses had grown 
larger by one-third; the number of hogs had been 
more than doubled. From 1887 to 191 1 the pro- 
duction of soft coal had tripled, increasing from 
j6 million to 234 million tons. In this respect 
Germany came third after the United States, which, 

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GERMANY'S CAPACITY TO PAY 

in 191 1, produced 450 million tons, and Great Brit- 
ain, whose output was 276 million tons. The num- 
ber of blast furnaces in Germany had increased from 
212 to 313. From these furnaces 16 million tons 
of pig iron was produced, a quantity equivalent to 
one-quarter of the world's output, less than the 
production of the United States, but 50% greater 
than that of England. As for steel, the situation 
was still more brilliant. Germany attained an out- 
put equal to half that of the United States and 
produced much more than double the output of the 
United Kingdom — 14 million tons against 6 million 
tons produced in Great Britain. 

Herr Helferich proudly enumerated the millions of 
workmen employed in the various branches of indus- 
try and showed how rapidly this force had multiplied 
during the last quarter of a century. In the fore- 
front he called attention to the building industries 
which employed more than a million and a half 
men who worked without periods of idleness in the 
construction of factories and dwellings. He pointed 
to the progress of postal, telegraphic and telephone 
communications, which had doubled, tripled and 
quadrupled, respectively. He showed that the rail- 
roads had increased their mileage from 26,000 to 
39,000 miles. The merchant fleet exceeded 4 millions 
in aggregate tonnage, tripling in size during the 
period mentioned. Germany's foreign trade had 
reached 25 billion francs in 191 2, of which 14 billions 
were imports and 11 billions exports. 

This rosy picture was followed by a study of the 
income of the German people estimated at 57 billion 

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francs. This factor was examined with particular 
care in the principal German State, the one in which 
financial organization was most perfect. In Prussia 
the number of inhabitants having an income inferior 
to 1,125 francs — the point from which the income 
tax starts — was 16 millions, including their families, 
whilst the number of income-tax payers exceeded 
*])/2 millions. If the families of the latter class were 
included it would be found that the number of persons 
subject to income tax was 24 millions against 16 
millions in the category not subject to tax. Herr 
Helferich pointed out that in the class of Prussians 
having an income between 1,135 and 7,500 francs 
the number of tax payers had increased by 150%; 
that in the category having an income ranging be- 
tween 7,501 francs and 125,000 francs the number 
had doubled; that in the class having an income 
larger than 125,000 francs the number of tax payers 
had been increased by 50%. Similarly, salaries had 
doubled. 

Passing on to the consideration of capital, the 
author sought to determine the wealth of the German 
people. The complementary tax imposed in Prussia, 
which affects capital, allows an estimate of the 
wealth of this Kingdom. In 191 1 it was estimated at 
200 billion francs, which would show an approximate 
capital of 325 billion francs for the Empire. Nu- 
merous additions to this figure should be made, 
however, and these additions would bring it up to 
the figure specified by a German writer whose work 
we shall review later and who arrived at a very 
much higher total. 

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GERMANY'S CAPACITY TO PAY 

Another sign of prosperity which Herr Helferich 
emphasized was the amount of issues of stocks and 
bonds, including state securities, which from 1886 
to 191 3 reached a total of 68 billion francs or a 
yearly average close to 4 billions at the end of the 
period considered. He pointed out, furthermore, 
with good reason, that this total was greatly inferior 
to the annual increase in the nation's wealth. It 
is only a part of the savings which is invested in new 
securities or which goes to swell the deposits in 
banks and savings banks. Many enterprises other 
than joint stock companies were increasing their 
capital and resources; many private enterprises were 
developing their equipment or adding to their 
plants. The rate of increase in the general wealth, 
which was 4% in 1893, had reached more than \o°/ f 
in 1913. 

During the fifteen-year period from 1897 to 191 2, 
at a time when the population had increased by 
28%, the capital possessed by it had undergone an 
augmentation of 50%. If, on the other hand, the 
use made by the Germans of their total income of 
57 billion francs is examined it will be found that 
9 billions were absorbed by the budgets of the 
Empire and the different states, 34 billions being 
devoted to personal expenditures of the inhabitants, 
while 14 billions represented the annual increment 
of the capital previously held. 

Such were the figures proclaimed on the eve of the 
war by one of the leading financiers of Germany, 
who, in presenting them to his readers, exclaimed: 
"This is indeed something to rejoice and inspire our 

[57] 



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hearts! Germany has raised herself to a level 
never before reached; she has shown herself to be 
the equal of the most powerful among her 
competitors. " 

Coincident with Herr Helferich's boasting about 
the economic aggrandizement of the Empire, many 
of his fellow-countrymen were devoting themselves 
to a minute study of the elements which made up 
this expansion. One of the latest estimates of 
Germany's fortune made before the war was by 
Herr Steinmann-Bucher, who had drawn up statis- 
tics divided into six sections, as follows: 

i. Movable property and real estate excluding 
land values: This total was established in accordance 
with the amounts for which such property were 
insured against fire. The total of policies as early 
as 1905 reached more than 2 billion francs; the 
author of the work justly remarked that if some of 
the policies exceeded the actual value of the property 
insured the contrary was true in many cases. More- 
over, approximately one-quarter of the real estate 
is not insured and several hundred mutual insurance 
companies were not included in the official statistics. 
This figure must therefore be increased to 225 billion 
francs at least. 

2. The land value of cities and rural districts: 
In urban districts this value often exceeds that of 
the actual buildings period. On the other hand, the 
land which forms the immediate surroundings of the 
cities has a constant tendency to increase in value 
through the expansion of the building area. Indeed, 
since 1871 the number of large built-up areas has 

[58] 



GERMANY'S CAPACITY TO PAY 

increased rapidly in Germany. In 1905 for every 
1,000 of the population 190 were dwellers in cities 
of more than 100,000 population, while in 1871 
this figure was only 48, that is to say, four times less. 
Herr Steinmann-Bucher valued the land in cities 
of this class at 37 billion francs and that of towns 
of smaller population at 62 billion francs. He 
arrives at the same figure for the total value of 
rural territory, counting 1,200 francs per hectare, 
which does not seem to be excessive. 

3. The German capital invested abroad and 
foreign funds owned by Germans: This class of 
wealth was estimated at 25 billion francs. Herr 
Steinmann-Bucher based his calculations of this 
figure upon the work of the Imperial Marine Bureau, 
and that oPHerr Erich Neuhaus, who gave a figure 
of 27 billion francs for 1906. This amount was 
rapidly increased during the succeeding years. 

4. Railroads owned by the various states making 
up the German Empire, particularly Prussia, state- 
owned mines, public buildings, ports, canals: 42 
billion francs. 

5. Ships, merchandise in transit on land or sea: 
5 billion francs. 

6. Bullion: 6 billion francs. 

By adding up the amounts contained in these six 
sections a total of 445 billion francs is arrived at 
and this was the figure at which a German estimated 
the wealth of his country eighteen years ago. It 
should be noted that he took no account of an- 
nuities, public funds or mutual obligations of 
German subjects. Consequently, it may be said 

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that this estimate was moderate. If some elements 
of the country's assets, such as ships and foreign 
securities, have been reduced since 191 2, the land, 
buildings and industrial equipment have undergone 
an increase in value similar to that which has taken 
place throughout the world. 

Thus the wealth of Germany was equivalent to 
more than twice the wealth of France, namely: 
225 billion francs, at the lowest estimate made in 
191 3. It was, moreover, 50% greater than the 
highest estimate of the wealth of France, namely: 
300 billion francs. Is it too much to contend that 
our country has been vitally injured to a greater 
extent than Germany and have we the right to assert 
that Germany is in a position to put forth a greater 
effort than we are? 

77. The Present Situation of Germany 

It appears, moreover, that numerous signs bear 
witness to the resumption of economic life on the 
other side of the Rhine. 

In reality one is impressed with the abundance and 
variety of advertising in the German newspapers, 
indicating business activity. In one place, directors 
for commercial or industrial concerns are sought; 
in another banks are demanding executives and 
arbitrageurs; jobbers are looking for help; mer- 
chants are advertising for salesmen; manufacturers 
in various parts of the country are making attractive 
offers to engineers; joint stock corporations are de- 
manding claims agents, factories need experts; 

[60] 



GERMANY'S CAPACITY TO PAY 

elsewhere it is electricians that are being sought. 
So much for requirements in staff. So far as mer- 
chandise is concerned, every kind is being offered: 
motors, window glass, machines of all varieties, 
miles of cable and tubing, trucks, boilers, cigars, 
agricultural implements, buckets and household 
utensils. The Frankfurter Zeitung, which is one of 
the principal organs of southern Germany, contains 
many more advertisements than before the war. 
Is that a sign of stagnation or economic depression? 

Numerous branches of German industry are 
flourishing. To realize this it is sufficient to take 
cognizance of the dividends paid by many com- 
panies and the rights offered to their shareholders 
in the form of reserve apportionments or the free 
distribution of shares. Let us consider the list 
recently published of a score of industrial groups, 
such as concrete construction, carriage building, 
lignite mining, woolen and cotton textiles, pencil 
factories, enamel ware, matches, hats, linen, rubber 
goods, steel products, etc. Moreover, during the 
single month of March, 1920, shares of the value 
of 163 million marks were distributed to stockholders. 

The German metal industries, as we have seen, are 
already operating at nearly two-thirds of their 
capacity, whilst the French metal industries are only 
working to the extent of one-quarter. This com- 
parison is eloquent of the respective situations of 
the two countries. 

We are given the impression that the whole 
German people is organizing a sort of conspiracy to 
cover up the figures of the country's production so as 

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to gain the pity of foreign countries on account of 
a situation which is much less painful in reality than 
in descriptions which are being spread broadcast. 

The population is already beginning to derive 
advantage from the drop in prices which has been 
heralded in France for several weeks, but which has 
not actually become effective with us with regard 
to any article of prime necessity. A telegram sent 
on May 27th, 1920, to the Frankfurter Zeitung 
announces that at Hamburg, as a result of large 
importations, real panic was felt by wholesale 
merchants. These merchants were doing their ut- 
most to unload their goods at any price offered, in 
spite of the losses which this liquidation involved. 
Freight trains, in rapid succession, were arriving in 
Berlin with loads of foodstuffs. The townships 
were particularly affected by a decrease in prices 
°f 30% to 40%, which depreciates in that proportion 
the stocks which the municipalities had accumulated. 
The warehouses are piled high with fats and mar- 
gerines. Dried vegetables, wine and fish have 
fallen 50%. The retailers who during the rise in 
prices did not cease to buy are now out of the 
market. Their failure to buy is making the drop 
in prices more rapid. Such factors as these seem 
to disclose living conditions in Germany which are 
in strong contrast with the difficult situation in 
which other European peoples find themselves. 

When we see in the newspapers that tobacco 
merchants are announcing cigarettes in full-page 
advertisements, when we read of embroidered goods 
bemg offered by tens of thousands and when we 

[62] 



GERMANY'S CAPACITY TO PAY 

see horse races resumed in Berlin and elsewhere, 
we have a right to wonder whether the complaints 
which are made in the press with regard to the 
terrible conditions in the country are altogether 
sincere. It seems, at least, that the Germans are 
certainly not any worse off than any of the other 
nations involved in the war and that their condition, 
if not altogether an easy one, is at least shared by 
every other nation and is rapidly improving. 

In order to obtain an idea of how Germany would 
have treated France as a defeated enemy it is not 
necessary to have recourse to a series of hypotheses. 
Even before the war an abundance of literature grew 
up in Germany around this subject, leaving little 
doubt as to the intentions of that nation in case of a 
victory which even then the aggressors took for 
granted. The books and pamphlets, the innumerable 
articles which appeared in newspapers and periodi- 
cals, all contained two basic ideas which were 
unanimously vindicated by the writers. In the 
first place it was advocated that the war should be 
waged with all possible brutality, that not only 
should armies and fleets be destroyed, but that the 
countries themselves should be ruined utterly and 
that the civil population should be terrorized, 
decimated and reduced to a state of slavery. The 
razing of houses and factories, the destruction of 
mines so as to obviate for a long period any possi- 
bility of competition by the inhabitants of those 

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regions which had been invaded and occupied by 
the German armies — all this was contemplated in 
the scheme of warfare. The second aim was a 
peace of conquest and domination which might 
assure the Germanic peoples of world hegemony. 
We show by a series of quotations the existence of 
this state of mind among the writers who had all 
absorbed the theories of Prussian militarism and 
who, asserting the semi-divine superiority of their 
race, proclaimed that there should be no hesitation 
between destroying the capital of a hostile country 
with its six million souls and allowing the loss of a 
single Pomeranian grenadier's life. 

This total absence of altruism is the predominant 
characteristic of a mentality which is diametrically 
opposed to our own. We may open at random any 
of the German works dealing with peace conditions 
and find that there is hardly one which does not 
speak of annexations as a necessity. Whilst French- 
men are always ready to consider the moral aspect 
of questions, the Germans profess an utter contempt 
for this point of view. The pamphlet of a certain 
Herr Scholtz contained the following: "If we had 
the means of destroying the whole city of London 
it would be more humane than to allow the blood of 
a single German to be shed on the battlefield, for 
radical measures are what brings peace most rapidly. 
To hesitate and wait, to use gentleness and considera- 
tion, would be unpardonable weakness. Brutal 
attack, unmitigated by any consideration whatever, 
is the means by which victory may be attained. 
Let the enemy say what he will of us. The only 

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GERMANY'S CAPACITY TO PAY 

thing we do not want is that on the day when peace 
shall be signed he may be able to pretend that the 
Germans have been weak-kneed. " 

On January 19th, 1916, Herr Martin declared 
before the Reichstag that the German people would 
not allow their government to return the territory 
which their armies then occupied. The general 
staff, having already realized nine-tenths of the 
programme of conquest, there only remained Calais, 
Verdun, Belfort. Riga and Salonika. There was 
nothing left for it to do but establish its forces 
firmly in the conquered positions and prepare the 
final incorporation in the empire itself of these 
provinces snatched from the enemy. 

In the same year, 1916, Dr. Bruno Heinemann 
and Dr. Neumann-Frohnau published a pamphlet 
entitled, "Frontier Territories of Enemy Nations 
and Their Significance from the German Point of 
View." After reviewing the status of Belgium, 
northern and eastern France, western Russia and 
what they called the gateway of the Orient, these 
authors concluded without further ado that what is 
good to take is good to keep. "It is fitting," they 
wrote, "not only to retain the territory occupied by 
us prior to the signing of peace, but to annex it 
definitely, so as to consolidate our national economic 
situation by the addition of this territory which 
should be attached to the empire If we do not 
take advantage of this opportunity, our position 
in a future war would become very much less 
fortunate, for our requirements in foodstuffs and 
munitions would be greatly increased. The peace 

1651 



THE PEACE OF JUSTICE 

terms must therefore be such as to assure the 
economic and political future of our country for an 
indefinite period. " This language is not difficult to 
understand. A glance through the book leaves no 
doubt as to its significance. "Annexation of the 
western Russian provinces would be of great value 
in keeping Germany supplied with food. Thus it 
would be proper to push our frontiers back to Lake 
Peipus and the rivers Pripet and Dnieper. But 
even that would not be enough. It would be 
necessary also to occupy Serbia so as to assure an 
adequate outlet for the commerce of central Europe. 
Serbia is the gateway of Bulgaria, Turkey and Asia 
Minor. All these countries require colonization by 
Germany. " 

In the month of June, 191 8, just when the Ger- 
mans believed they were on the point of attaining 
their goal, Count von Roon, a relative of the former 
minister of war who played so important a part 
in the reign of William I, published in the Goerlitz 
Gazette the programme which the annexationist 
leagues were demanding should be integrally applied. 
This programme may be summarized as follows: 

"Germany has sufficient strength, attained 
through victory, not merely to reach an agreement 
with her adversaries, but to dictate the following 
conditions: No truce; no armistice; no interruption 
of submarine warfare; refusal to listen to any pro- 
posal of the Entente powers so long as a single 
English soldier remains on Belgian or French soil, 
and so long as the Germans are not either within 
Paris or at its gates. Annexation of Belgium, while 

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GERMANY'S CAPACITY TO PAY 

granting it local administrative autonomy. Annexa- 
tion of all the coast of Flanders as far as Calais. 
Annexation of the basins of Briey and Longwy, 
of Toul, Belfort, Verdun and the territory east of 
these cities. Restoration to Germany of all her 
colonies, including Kiao-Chou. So as to assure the 
freedom of the seas, England must yield to Germany 
all her naval bases as well as the coaling stations 
which Germany shall indicate. England shall re- 
store Gibraltar to Spain. England shall surrender 
her fleet to Germany, return Egypt and the Suez 
Canal to the Porte, besides everything that belongs 
to Turkey. 

"Greece shall be reinstated beneath the authority 
of King Constantine within its former limits such 
as they existed before the war began. Serbia and 
Montenegro shall be divided between Austria and 
Bulgaria. 

"England, France and the United States of 
America shall be compelled to pay Germany all the 
costs of the war, amounting at least to 180 billion 
marks, or 225 billion francs, and they must promptly 
deliver all the raw materials which Germany shall 
require. France and Belgium must remain under 
the occupation of German troops, at the expense of 
these countries, until all the foregoing conditions 
have been fulfilled." 

Is it necessary to emphasize the contrast which 
these conditions present as compared with the 
terms of the Treaty of Versailles? Germany, whose 
territory remained untouched, was asking, not 
reparation of damages actually suffered, but repay- 

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ment with usury of everything which she had spent 
in waging the war. It was not a restoration to the 
empire of faithful peoples that she was demanding; 
rather was she brutally contemplating the annexa- 
ion of territory to which her claims arose merely 
from alleged military necessity, without occupying 
herself in the least with the feelings of the inhabitants. 
"Everything will be all right," wrote Count von 
Roon. "Let us first of all carry out our programme." 

Many other articles of the peace treaty were 
worked out on the other side of the Rhine during 
the war. The imagination of the Pan-Germans 
was given free rein in the direccion of every term 
which they were preparing to impose upon us. As 
early as 1914 the famous Count von Bernstorff, 
ambassador at Washington, had begun to lay down 
certain conditions of the peace, such as the surrender 
to Germany of all the French colonies, of all the 
northeastern section of France, the suppression of 
all customs duties applied to the entry of German 
goods into France, while Germany should retain 
full liberty of imposing duties on French merchan- 
dise; the abandonment by France of her system of 
compulsory military service; the destruction of all 
French forts; the granting of special rights with 
regard to German patents in France; that France 
should renounce any alliance with Russia or England 
and that she should accept an alliance of twenty-five 
years with Germany. 

But we have promised to confine ourselves within 
the scope of economics and not take up political 
questions. Enough has been said of the latter to 

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GERMANY'S CAPACITY TO PAY 

show how radically the terms of the Versailles 
treaty differ from what the Germans were proposing. 
They, indeed, would not have inserted articles en- 
tailing an examination by the victors of the paying 
capacity of their defeated enemies before exacting 
payments. Not only would they have failed to give 
a thought to anything of the sort, but they would 
have imposed Draconian terms, with the secret hope 
that such terms could not have been carried out and 
that the security given for their execution could be 
retained by themselves. Unquestionably they would 
not have failed to exact valuable and ample security. 

The question of knowing how they would obtain 
payment was contemplated by the Germans with a 
clearness which is instructive as to the manner in 
which they would have attained their object. This 
is what Baron von Zedlitz-Neukirch, a member of 
the Prussian Diet, who voiced the ideas of the 
majority of the large proprietors, manufacturers, 
ship-builders and merchants, had to say on the 
subject: 

"The sum of the indemnities for the war and our 
losses will reach an almost fabulous figure. Thus it 
will be impossible to exact full restitution of our 
expenses and our losses in negotiable securities. 
Since, on the other hand, nothing can induce us to 
give up our claims to such full and absolute restitu- 
tion, it becomes necessary to obtain it in another 
form. For restitution in cash can be substituted 
certain economic advantages calculated to increase 
our national wealth. This will be realized by favor- 
able commercial treaties, concessions of mines and 

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railways. Besides that we must take territorial 
acquisitions. The metallurgical deposits of French 
Lorraine and Russian Poland will serve to supple- 
ment our own mineral resources. Reaching a just 
and practical solution of these problems by such 
means is certainly a task which merits most earnest 
efforts." 

It is easy to guess what Baron von Zedlitz-Neu- 
kirch means by a "just and practical solution," such 
as he considered worthy of the most earnest efforts. 
This solution consisted, so far as Germany was con- 
cerned, in exacting payment, not only for war dam- 
ages, but for all the cost of the war. Once the sum 
was fixed, what could not have been paid in negoti- 
able securities would have been covered by terri- 
torial annexations and a multitude of concessions. 

Among the numerous publications which during 
the war revealed with naive cynicism the German 
state of mind, is a pamphlet by Count Reventlow 
significantly entitled, "Do We Need the Flemish 
Coast?" In this work he piles up arguments to show 
that Germany could not live without the conquest 
of this territory. Nature, according to this author, 
had placed all strategic advantages on the side of 
England. Consequently the defenses of Germany on 
the Baltic must be buttressed by similar defenses 
on the North Sea, without which Germany could not 
control the ocean. 

It was not only the coast that Reventlow deemed 
necessary to the security of the Fatherland, but the 
whole of Belgium, without which, he declared, it 
would be impossible to assure the economic revival 

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GERMANY'S CAPACITY TO PAY 

and independence of the German people and empire. 
His entire volume revolves around this theme, that 
German naval power cannot be fully developed with- 
out the coast of Belgium. Therefore, he concludes, 
no question can arise as to whether or not such an- 
nexation would be legitimate. 

Whilst the spirited Reventlow was sending forth 
his diatribe which should fan among his compatriots 
the flame of ardor for what he called indispensable 
conquests, other Pan-Germans were compiling statis- 
tics to impress them with what would be the con- 
sequence of the peace unless it was drawn up accord- 
ing to the indications of the emperor and his gen- 
erals. One of the most curious lucubrations of this 
kind appeared in 1918 under the title of Deutschlands 
Lage beim Friede ("The Situation of Germany at the 
Time of Peace"). This sharply criticizes the Pope's 
note of August 1, 1917, in which the Sovereign Pontiff 
urged the evacuation of Belgium and the occupied 
portions of France. The most interesting passage of 
this pamphlet is that in which it establishes the 
balance sheet of the public funds one year after the 
declaration of peace in each of various cases which 
the writer supposes. In case the Allies should be 
victorious, the author grants that Germany would 
have to pay their war expenses to the extent of 320 
billion francs, and the damages caused in France, 
Belgium, England and Russia to an amount of 54 
billion francs. That is the figure at which our enemies 
themselves expected to be taxed in case of defeat. 
They know as well as we do that the damages in- 
creased enormously after that time. Their own ad- 

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mission emphasizes the moderation of the Treaty of 
Versailles. There can be no sort of comparison 
between what the treaty now demands of them and 
what they would have exacted in case of German 
victory. 

One of the books most characteristic of the Ger- 
man mentality appeared at Leipzig in 191 8 under the 
signature of Kurd von Strautz, and entitled, "The 
Object of Our People's War" (Unser Voelkiches 
Kriegsziel). It begins with an admission of which we 
quote the first lines hereunder: 

"Already in my schooldays the impression of the 
last Franco-Prussian War strongly influenced me. 
Thanks to the wonderful teaching of history which I 
received at the Joachimstal gymnasium in Berlin, I 
drew away from classical culture, which is too prone 
to neglect nationalism. From that time the dream 
of my life was to behold the outbreak of this war of 
retribution (Vergeltungskampf) — for such is the name 
by which the present war should be known — in which 
I have never ceased to believe, but which I was 
afraid to see indefinitely postponed under the influ- 
ence of the deplorable pacific optimism (Frieden- 
seligkeit) on the part of the government which had 
succeeded that of Bismarck. I strove with voice and 
pen for the realization of this war of vengeance 
{Rachekrieg) which was to reconstitute finally the 
frontiers of our people and our empire as they existed 
in 1552, which have been impaired at intervals both 
on the east and the west. Neither 181 5 nor 1871 
restored them to us. Bismarck began, but was not 
able to complete, the process of our recovery, and 

[72] 



GERMANY'S CAPACITY TO PAY 

after him commenced that decadence which the pres- 
ent war alone is capable of checking." 

This war Herr von Strautz hailed with transports 
of joy. He considers, moreover, that Germany, in 
alliance with Holland, Belgium, and Switzerland, lean- 
ing on Austria, would be an adversary capable of crush- 
ing poor France, deprived earlier of Lorraine, French 
Flanders, Artois, Cambresis, and Franche-Comte. 

We should like to know what Herr Kurd von 
Strautz thinks to-day and whether he is still rejoicing, 
with the same spirit of gayety, over Germany's 
aggressions of 1914. 

The annexationist literature was not only abun- 
dantly enriched with publications signed by German 
authors, for these gentlemen recruited a Dutchman 
also to their cause. A certain Hans Clockener, who 
styles himself a retired lieutenant of the army of the 
Netherlands, wrote a pamphlet entitled, "Why and 
in what manner must Germany make annexations?" 
He declared in this work that the war had taught 
him that he belongs to a great race. He pitied Ger- 
many for having such bad frontiers, particularly in 
the neighborhood of Belfort, which, he declared, 
Bismarck had the "signal weakness of leaving to 
France in 1871." The war of 1870 created German 
unity; that of 1914, he held, should create Germanic 
unity, which would include the Scandinavian coun- 
tries, the Netherlands, Austria, and Switzerland. 

IV. The Treaties of Brest-Litovsk and Bucharest 

Why indeed should one seek proofs of the German 
plans in the numerous works published by them 

[73] 



THE PEACE OF JUSTICE 

during the last several years? Is it not enough to 
recall the terms of the treaties of Brest-Litovsk and 
Bucharest dictated to Russia and Roumania? When 
the Roumanian delegates protested against the 
severity of the clauses which the victorious Germans 
passing through their country forced them to sign, 
the Germans replied, "You will appreciate the 
moderation of Germany when you know the condi- 
tions which the Central Empires are about to impose 
upon the western powers." 

Nevertheless, the first of the treaties which we 
have just cited, that of Brest-Litovsk signed on 
March 7, 1918, took from Russia Poland with a 
population of 11 millions, Lithuania with 9 millions, 
Livonia and Esthonia with more than 2 million in- 
habitants. It detached from the mother country 
Ukraine, Finland, and Georgia, which Germany pre- 
tended to recognize as independent republics but 
over which she actually exercised a protectorate. In 
reality, these more or less disguised annexations 
placed immense areas under the dominion of Ger- 
many and a population exceeding 50 million souls. 

The treaty of Bucharest of May 7, 191 8, involved 
treachery on even a greater scale than that of Brest- 
Litovsk. Germany made believe that she was de- 
manding no territory for herself, but she began by 
allocating to Bulgaria an area of 4,000 square 
kilometers and to Austria the southern section of 
the Carpathians in such a way as to make the 
boundaries of Roumania impossible to protect. She 
took away Dobrudgja, which was thenceforth placed 
under a system of joint control, in which Germany 

[74] 



GERMANY'S CAPACITY TO PAY 

had the upper hand. Thus Germany gained a footing 
in the port of Constanza and assured for herself an 
outlet to the Black Sea. Hungary on its side became 
possessed of the oil and coal deposits of the Bacau 
region. Further to the south, through frontier re- 
arrangements, the districts of Buzeu and Prahova 
with their important manufacturing centers were 
absorbed. In the Turnu-Severin region, Germany 
took possession of the copper deposits of Baia de 
Amara. Finally, Article 12 of the Treaty of 
Bucharest stipulated that no obligation of any kind 
would be involved either on the part of the territories 
taken away nor on that of the states which acquired 
them on account of the fact that these territories had 
belonged to Roumania. The entire Roumanian debt 
remained as a charge upon Roumania, which had been 
shorn of a considerable portion of its population and 
wealth. 

Germany gained control of all the oil deposits of 
the country through the intermediary of three organi- 
zations, the Oil Industries Corporation, which was to 
absorb rival enterprises, the Commercial Monopoly 
Corporation, which was to dispose of the total pro- 
duction, and the Operating Corporation of the oil- 
bearing lands, whose function it was to take posses- 
sion of the very sources of the industry. This last 
corporation, of German nationality, obtained for 
thirty years the exclusive right to exploit land owned 
by the Roumanian Government with the exception 
of that part which had been given up before August 
1st, 1916, in addition to the right of prospecting, 
extracting and refining mineral oils, gas, asphalt and 

[75] 



THE PEACE OF JUSTICE 

other bituminous minerals. The land excluded 
from this clause was to revert unconditionally to the 
operating corporation at the expiration of the con- 
cessions then existing. The renewal of all these 
privileges was provided for over two periods of equal 
duration in such a way that for 90 years the Rou- 
manian state was deprived of the free use of the 
richest portion of its territory. The Commercial 
Corporation, in return for an insignificant tax of 
3 leis 40 per ton to be paid to the Roumanian 
Government, was in a position to supply Germany 
from that time forward, Germany being represented 
on the Executive Board by agents of the big German 
metallurgical, oil and navigation industries. 

All precautions were taken with regard to the rail- 
roads. In Ukraine the Central Empires had reserved 
for themselves the control of the various systems 
under pretext of protecting the transportation of 
merchandise imported by them. German troops oc- 
cupied the railroad lines as far as the eastern fron- 
tiers. From Russia, Germany obtained free access 
to Persia and Afghanistan In Roumania, a repre- 
sentative of the German Government was to take up 
residence and actually control the administration. 
The Roumanian telegraph system was placed under 
German control. Until the year 1950 this system 
was to maintain a station on the Roumanian coasts 
for the landing of submarine cables. 

These various clauses entailed levies far exceed- 
ing several hundred million francs or even several 
billion francs in the form of indemnities. The 
Munich Journal, in its issue of May 18th, 191 8, rec- 

[76] 



GERMANY'S CAPACITY TO PAY 

ognized that "these indirect war indemnities gave 
very substantial benefits to Germany, and that Ger- 
many might be satisfied if she succeeded in conclud- 
ing peace with her other enemies on similar condi- 
tions." We have no difficulty in believing this. So 
far as Russia was concerned, no pains were taken even 
to keep up an appearance of leniency. A total in- 
demnity and fine of 6 billion marks was imposed upon 
this country, one-quarter of which was to be paid 
with 245,564 kilograms of fine gold and 545 million 
roubles in bank notes of the former regime; one- 
sixth was to be paid in merchandise; five-twelfths 
by handing over securities; the last sixth would 
remain as a charge upon Ukraine and Finland. 

We might fill many pages with the enumeration of 
political, economic, and financial advantages which 
Germany had thus obtained. In connection with the 
gold and other value deposited in the German Im- 
perial Bank on account of the Roumanian National 
Bank, Germany declared that a part of this sum, 
having disappeared through administrat ve acts of 
the German authorities, could not be restored and 
that the balance would remain in Berlin as security 
for the payment of Roumanian State bonds belonging 
to German subjects. Commercial treaties very favor- 
able to the Central Empires were again put in force. 
Unimpeded transportation of German merchandise 
toward Asia through Roumania was assured. In a 
word, Germany had not hesitated to employ every 
means to guarantee her sway in eastern Europe. By 
making two German lakes of the Baltic and the Black 
Sea she insured the control of the Danube throughout 

[77] 



THE PEACE OF JUSTICE 

its navigable length. For the Hamburg-Bagdad 
Railroad, the completion of which was made impos- 
sible from that time by the military successes of the 
Entente in Palestine and Mesopotamia, she substi- 
tuted the Hamburg-Theren Railroad through Rou- 
mania, Ukraine and Turkey. 

Although the two treaties of Brest-Litovsk and 
Bucharest were annulled by the Treaty of Versailles, 
it serves a useful pupose to recall the causes of these 
treaties to our readers and to show them how Ger- 
many treats the vanquished. It is impossible to 
imagine any more complete control over their re- 
sources or any series of stipulations better calculated 
to make these countries dependent from an economic 
standpoint. What would the Germans have said if 
we had established French corporations to exploit for 
our own benefit and for a hundred years the potas- 
sium salt deposits of Stassfurt or the coal mines of the 
Ruhr region and Silesia? What would they have 
thought if we had taken control of their railroads and 
installed our engineers in their ports — if, in short, we 
had, through the Treaty of Versailles, put into efFect 
the extraordinarily subtle and lasting system which 
was involved in the German treaties of March and 
May, 1918? 



[78] 



CHAPTER IV 



CONCLUSION 



We have followed the course taken by other eco- 
nomic writers on the subject of the Treaty of Ver- 
sailles, without overlooking any of the important 
arguments adduced in support of the criticisms of 
that document, and we hope we have given a convinc- 
ing answer on every point. Let us now turn to our 
fellow-countrymen and our Allies, and say to them: 
"This is the Treaty. Give careful study to its various 
clauses once more and absorb them. It is the work 
of human beings constructed methodically. If it is 
carried out, it can serve as a guide to humanity for a 
long period of years. To destroy it would involve 
opening the way to dangerous unknown regions and, 
above all, would give Germany a pretext for evading 
the fulfillment of her engagements. What statesman 
would dare to shoulder this great responsibility ?" 

The real method of insuring the peace which our 
unhappy world has so fervently prayed for is to main- 
tain perfect unity among those to whom the repara- 
tions are due and to show an attitude of firmness to 
those who owe these reparations. What will 63 
million Germans be able to say to the 200 millions of 
the Allied peoples if the latter, without hatred but 
without weakness, demand what belongs to them? 

[79] 



THE PEACE OF JUSTICE 

It is in the interest of the Germans themselves that 
they should not have any doubt as to the unanimous 
will of those who signed the treaty. The certainty 
which they will feel in this respect will discourage 
their attempts at evasion which the hope of disunion 
among the associated powers would unquestionably 
encourage. They will then abandon plans of useless 
armament because they will be convinced of their 
inferiority in the face of a coalition determined to 
maintain peace. They will direct their efforts to- 
wards the establishment of a budget in which allow- 
ance will be made for expenses necessary to the devel- 
opment of the country and at the same time for the 
payments due to the Allies. 

Which among the generals and statesmen of 
Prussia would have occupied themselves with finding 
out the Allies' capacity to pay at a time when they 
were dictating a Treaty of Peace and fixing the war 
indemnity? 

Not only would the Germans have failed to make 
any attempt at remaining within this figure, but they 
would have taken steps to obtain substantial guaran- 
tees from which they would have derived consider- 
able benefit in case we should not have been able to 
meet their terms. We find nothing similar in the 
Treaty of Versailles, which, on the contrary, enjoins 
upon the Allies a study of the financial situation of 
Germany so as to find out whether she is in a position 
to meet the interest and amortization fund before 
exacting the payment of the 40 billion marks in gold 
bonds which is to make up the payment of the first 
hundred billion marks due by Germany. 

[80] 



CONCLUSION 

Here is the hub of the problem. Those who drew 
up the treaty wished not only to do justice and to 
show moderation, but also have made the fulfillment 
— not of the entire obligation involved, but of its first 
part alone — secondary to the consideration of the ca- 
pacity of Germany to pay. Their mistake lay in the 
fact that they believed the determination of that ca- 
pacity to be an eas} thing when it is actually almost 
impossible. One of the most terribly complicated 
problems which a picked assemblage of diplomats and 
statesmen were confronted with was that which con- 
sists of establishing the amount which a country is in 
a position to pay to its creditors. In addition to the 
fact that the primary statistics which would permit of 
establishing a definite basis do not exist, this effort 
would be complicated further, even if it could be 
achieved at a fixed date, by factors which are funda- 
mentally variable. The wealth of a nation changes 
from year to year. The differences in crops and for- 
eign trade alone represent billions within the period 
of a few months. 

On the other hand, one may ask whether it is capi- 
tal or income which should be considered. One is 
indeed a function of the other; but if it is an almost 
superhuman task to estimate the wealth of a nation, 
that of figuring the annual income of its subjects is 
an impossibility, so variable are the divers elements 
which make up this figure. Their mutability in many 
cases is such that they cannot be controlled by any 
system of official registration. Moreover, the magni- 
tude of the sums to be paid as reparation to the Allies 
is such that the only conceivable method of payment, 

[81] 



THE PEACE OF JUSTICE 

at least so far as the majority of the debt is con- 
cerned, is in the form of annuities. 

Germany must liquidate her debt by means of 
annual payments comprising the interest on the debt 
and a fraction thereof by way of amortization. It is 
from the income of the nation that these annuities 
must be levied; they constitute a charge upon her 
budget. Thus we arrive at the question of determin- 
ing what this budget must be. According as the 
military expenditures are which form so important a 
part of every nation's budget, greater or smaller 
sums, more or less considerable, will be available for 
other payments. It is evident that a nation which 
has obligations to fulfill to another has not the right 
to regulate its finances as it would do if no such obli- 
gation existed. A nation in this position must avoid 
every sort of waste; it must avoid every experiment 
that might be undertaken by the nation which would 
involve abnormal expenditures; it must refrain from 
adopting any policy of conquests which would swell 
its budget; it must reduce its administrative ex- 
penses to what is absolutely necessary until such 
time as it shall have regained full freedom of action 
through having paid off all its creditors. It is easy to 
realize how large an amount could be made available 
in the German budget by following a policy of this 
kind, which is the only one that Germany can now 
rightfully pursue. The Treaty of Versailles has care- 
fully limited the military strength which Germany 
is allowed to maintain. In this respect alone she will 
expend an amount vastly inferior to her outlay before 
the war. The same will apply to the navy. She has 

[82] 



CONCLUSION 

no more colonies and is therefore in a position to 
exist without destroyers, torpedo boats and subma- 
rines. This transformation of a military and aggres- 
sive empire into a democracy will alone release many 
billions of francs. 

Let us approximate these figures. France with 39 
million inhabitants has an ordinary budget of 20 
billion francs. An equivalent budget of Germany 
with a population of 63 millions, would be more than 
33 billion francs. But there is another consideration: 
The figure of 20 billions takes no account of the losses 
incurred by France. She has an extraordinary budget 
of 7 billion francs, many sections of. which will have 
to be maintained for a great number of years. This 
amount must be included starting with the year 
1920, which brings our total budget to 27 billion 
francs. When this is taken into account, the equiva- 
lent for the German people would be 40 billion francs. 

Let us now examine the details of this budget. 
Three billion francs should suffice for the normal ex- 
penses of a country whose total budget, including or- 
dinary and extraordinary expenditures, did not ex- 
ceed that figure 12 years ago. In 1906 Germany's 
figure was 2,400,000,000 Reichs-marks, which was 
equivalent to 3 billion francs. 

Granting that the depreciation of the paper mark 
justifies an increase of this asset, there would remain 
about 30 billion francs of yearly income. The 
Allies are entitled to a preference on this income, 
which by itself would be sufficient to secure a return 
on a capital of 500 billions, at the rate of 6 per 100, 
and on a capital of 600 billions with a rate of 5 per 

[83] 



THE PEACE OF JUSTICE 

ioo. The loan for which these incomes would be 
pledged may be placed at a figure which would be 
nearer the last rate mentioned. The way, therefore, 
is now clear. It will be necessary to have Germany 
create bonds for the capital of her debt as soon as 
the amount of the same will have been fixed. Let us 
not forget that in principle this amount should be 
equal to the amount of damage ascertained by the 
Commission of Reparations: if the latter should, for 
instance, have fixed the amount at 300 billion francs,* 
that is to say 240 billion gold marks, this would only 
constitute a yearly charge of 12 billion marks or 15 
million francs — that is to say, much less than the 
revenue available. There would be a considerable 
margin for the difference of value between the gold 
mark and the paper mark. These computations are 
based on the theory that Germany would not be 
taxed proportionately higher than is France, although 
there would be nothing excessive in having her taxed 
higher. When the average charges which are a bur- 
den on French taxpayers are computed, the latter are 
made to include the unfortunate inhabitants of the 
devastated regions for whom it is a material impos- 
sibility to pay taxes. The share of the other inhab- 
itants of France is accordingly increased, and it is 
this figure thus corrected and increased which should 
be compared with the German taxes in order to ascer- 



* Note: as reported to the Reparations Commission French losses 
recoverable under the treaty amounted to 2i8>£ billion francs as of 
May 1 st, 1 92 1, as compared with British losses of 2% billion pounds 
sterling plus 7^ billion francs, Italian losses of 128 million pounds 
sterling plus 33 billion lire, and Belgian losses of 71 billion francs. See 
the Economist (London) for February 26th, 1921. 

[84] 



CONCLUSION 

tain if they reach the minimum limits fixed by the 
Versailles Treaty. 

The preceding pages furnish points of comparison 
according to which it is possible to make a first esti- 
mate of Germany's capacity to pay. But the latter 
cannot be mathematically determined in advance. 
Just as during the last years of the nineteenth cen- 
tury and the first of the twentieth, the economic 
power of our enemies had increased at an extraor- 
dinarily rapid rate, so it is likely that in the future, 
with the aid of their prolificness and their working 
spirit, they may resume the march forward upon the 
road of industrial and agricultural progress which 
they had begun with such energy. 

If in the year 1888, at the time William II ascended 
the throne, an economist, prophesying, should have 
mentioned the figures of German production in 1913, 
he would have been called visionary. Likewise to- 
day, whoever would predict the increasing ease with 
which Germany can meet the annual charge destined 
to extinguish within a given period the principal of 
the indebtedness of the Central Powers and their 
allies toward us, would greatly astonish his audience. 
It is probable, however, that he would be entirely 
right. Timid imaginations have been frightened by 
the amount of hundreds of billions representing the 
damages caused to the Allies, as if it were a matter 
of transferring at once a metallic treasury of that 
amount from the wealth of the vanquished to that of 
the victors. The problem is not presented thus. The 
Germans are not called upon to pay this sum at once; 
they are asked to recognize themselves as debtors 

[85] 



THE PEACE OF JUSTICE 

for it and they are given thereafter sufficient time to 
settle the interest and sinking fund. 

The fundamental error of Mr. Keynes and those 
whom he has led astray has consisted in never estab- 
lishing a parallel between the burdens of Germany 
and those of the Allies. He has constantly reasoned 
as if in the future Germany would have to meet the 
competition of nations free of all debt, paying little 
or no taxes, finding themselves by the power of some 
magic wand in possession of their prewar means. 
This is the contrary of the truth. In what concerns 
us, we French have shown the financial effort which 
we are making at this very time, and we shall not 
cease to repeat that Germany by merely creating 
taxes equivalent to ours will have ample enough to 
settle with us. Mr. Keynes, in a preface which he 
has just written for the French edition of his book, 
declares that the events which have taken place since 
he wrote it have convinced him that the estimates 
which he gave of the resources of Germany, far from 
being too low, are probably too high. I hope to have 
shown the contrary. The English author has singu- 
larly misunderstood the economic power of our 
enemies. He has misunderstood them from both the 
absolute and the relative point of view. He estab- 
lished no comparison between the agriculture nor 
between the industry of the Germans and the Allies 
and of France in particular. He did not analyze the 
fiscal system of the powers whose return to a normal 
life should be facilitated. He did not compare the 
man power loss, more cruel for us in quantity and 
quality than among any of the other belligerents. 

[86] 



CONCLUSION 

Hence the Commission of Reparations need only 
pursue its work and see to the carrying out of the 
Versailles Treaty. It should first of all accelerate 
settlements in kind beginning with coal. It should 
require the total delivery of the ioo billion marks 
gold bonds which impose on Germany an annual 
charge very inferior to her capacities of payment. 
It has achieved the determination of the amount due 
by Germany. It should determine the mode of pay- 
ment of this sum. With Germany knowing the total 
amount of her debt and each of the Allies able to 
reckon with the payments secured to it, a first and 
great step has been accomplished along the road 
which is to bring us back to the era of balanced bud- 
gets and normal finances. The more we study the 
clauses of the Treaty of June 28th, 1919, the more 
we examine the respective condition of those who 
signed it, the more we deem ourselves entitled to 
proclaim as the conclusion of our work that the title 
we gave it is the very expression of truth, "The 
Peace of Justice. " Hardly just for the victors, to 
whom it assures only part of the sums expended and 
to be expended by them; just toward the vanquished, 
on whom it only imposes burdens which do not ex- 
ceed their means. 



[87] 



APPENDIX 

PROTOCOL OF THE REPARATIONS COMMISSION 

{April 28th, 1921) 

The Reparations Commission has in accordance 
with Article 232 of the Treaty of Versailles proceeded 
to define the time and manner for securing and dis- 
charging the entire obligation of Germany for 
reparation under Articles 231, 232 and 233 of the 
Treaty as follows: 

This determination is without prejudice to the 
duty of Germany to make restitution under Article 
238 or to other obligations under the Treaty. 

(1) Germany will perform in the manner laid down 
in this schedule her obligation to pay the total fixed 
in accordance with Articles 231, 232 and 233 of the 
Treaty of Versailles by the Commission, viz., 132,- 
000,000,000 gold marks, less (a) the amount already 
paid on account of reparation; (b) sums which may 
from time to time be credited to Germany in respect 
of State properties in ceded territory, etc., and 
(c) any sums received from other enemy or ex-enemy 
Powers in respect of which the Commission may 
decide that credit should be given to Germany, plus 
the amount of the Belgian debt to the Allies, the 
amounts of these deductions and additions to be de- 
termined later by the Commission. 

[88] 



APPENDIX 

(2) Germany shall create and deliver to the Com- 
mission in substitution for bonds already delivered 
or deliverable under Paragraph 12c of Annex 2, 
Part VIII, Treaty of Versailles, bonds hereafter 
described. 

(a) Bonds for the amount of 12,000,000,000 gold 
marks. These bonds shall be created and delivered 
at the latest on July 1st, 1921. There shall be an 
annual payment from funds to be provided by 
Germany as prescribed in this schedule in each year 
from May 1st, 1921, equal in amount to 6% of the 
nominal value of the issued bonds, out of which 
there shall be paid interest at 5% per annum payable 
half yearly on the bonds outstanding at any time, 
and the balance to a sinking fund for redemption of 
bonds by annual drawings at par. These bonds are 
hereinafter referred to as bonds of Series A. 

(b) Bonds for a further amount of 38,000,000,000 
gold marks. These bonds shall be created and de- 
livered at the latest on November 1st, 1921. There 
shall be an annual payment from funds to be pro- 
vided by Germany as prescribed in this schedule in 
each year from November 1st, 1921, equal in amount 
to 6% of the nominal value of the issued bonds, 
out of which there shall be paid interest at 5% 
per annum, payable half yearly, on the bonds out- 
standing at any time and the balance to a sinking 
fund for the redemption of the bonds by annual 
drawings at par. These bonds are hereinafter re- 
ferred to as bonds of Series B. 

(c) Bonds for 82,000,000,000 gold marks, subject 
to such subsequent adjustment by creation or can- 

[89] 



THE PEACE OF JUSTICE 

celation of bonds as may be required under the first 
paragraph. These bonds shall be created and de- 
livered to the Reparations Commission without 
coupons attached at the latest on November 1st, 
1921. They shall be issued by the Commission 
as and when it is satisfied that the payments which 
Germany is required to make in pursuance of this 
schedule are sufficient to provide for the payment of 
interest and sinking fund on such bonds. There 
shall be an annual payment from funds to be pro- 
vided by Germany as prescribed in this schedule in 
each year from the date of issue by the Reparations 
Commission equal in amount to 6% of the nominal 
value of the issued bonds, out of which shall be paid 
interest at 5% per annum payable half yearly on 
the bonds outstanding at any time and the balance 
to a sinking fund for redemption of the bonds by 
annual drawings at par. The German Government 
shall supply to the Commission coupon sheets for 
such bonds as and when issued by the Commission. 
These bonds are hereinafter referred to as bonds of 
Series C. 

(3) The bonds provided for in Article 2 shall be 
signed by the German Government as bearer bonds 
in such form and in such denominations as the 
Commission shall prescribe for the purpose of making 
them marketable, and shall be free of all German 
taxes and charges of every description, present or 
future. 

Subject to the provision of Articles 248 and 251, 
Treaty of Versailles, these bonds shall be secured on 
the whole assets and revenues of the German 

[90] 



APPENDIX 

Empire and the German States, and in particular 
on the assets and revenues specified in Article 7 of 
this schedule. The service of bonds A, B, C shall 
be a first, second and third charge respectively on 
said assets and revenues, and shall be met by 
payments to be made by Germany under this 
schedule. 

(4) Germany shall pay in each year until the 
redemption of bonds provided for in Article 2 by 
means of a sinking fund attached thereto: (1) the 
sum of 2,000,000,000 gold marks. (2) (a) A sum 
equivalent to 25% of the value of her exports in 
each period of twelve months, starting from May 
1st, 1921, as determined by the Commission, or 
(b) alternatively, an equivalent amount as fixed in 
accordance with any other index proposed by 
Germany and accepted by the Commission. (3) A 
further sum equivalent to 1% of the value of her 
exports, as above defined or, alternatively, an 
equivalent amount fixed as provided in Paragraph B 
above. Provided always that when Germany shall 
have discharged her obligations under this schedule, 
other than her liability in respect of outstanding 
bonds, the amount to be paid in each year under 
this paragraph shall be reduced to the amount re- 
quired in that year to meet the interest and sinking 
fund on the bonds then outstanding. 

Subject to the provisions of Article 5, the pay- 
ments to be made in respect of Paragraph 1 above 
shall be made quarterly on or before January 15th, 
April 15th, July 15th and October 15th, each year, 
and payments in respect of Paragraphs 2 and 3 

[91] 



THE PEACE OF JUSTICE 

above shall be made quarterly on or before February 
15th, May 15th, August 15th and November 15th 
and calculated on the basis of exports in the last 
quarter but one preceding that quarter, the first 
payment to be made on or before November 15th, 
192 1, to be calculated on the basis of exports in 
the three months ending July 31st, 1921. 

(5) Germany shall pay within twenty-five days 
from this notification 1,000,000,000 gold marks in 
gold or approved foreign currencies or approved 
foreign bills or in drafts at three months on the 
German Treasury, endorsed by approved German 
banks and payable in pounds sterling in London, 
in francs in Paris, in dollars in New York or any 
currency in any other place designated by the 
Commission. These payments will be treated as 
the two first quarterly instalments of payments 
provided for in Article 4, Paragraph 1. 

(6) The Commission will within twenty-five days 
from this notification, in accordance with Para- 
graph 12A, Annex 2, of the Treaty as amended, 
establish a special sub-commission to be called the 
Committee on Guarantees. The Committee on 
Guarantees will consist of representatives of the 
Allied Powers now represented on the Reparations 
Commission, including a representative of the 
United States in the event of that Government 
desiring to make an appointment. The Committee 
shall comprise not more than three representatives 
of nationals of other Powers whenever it shall appear 
to the Commission that a sufficient portion of the 
bonds to be issued under this schedule is held by 

[92] 



APPENDIX 

nationals of such Powers to justify their represen- 
tation on the Committee on Guarantees. 

(7) The Committee on Guarantees is charged 
with the duty of securing the application of Articles 
241 and 248 of the Treaty of Versailles. 

It shall supervise the application to the service 
of the bonds provided for in Article 2 of the funds 
assigned as security for the payments to be made 
by Germany under Paragraph 4. The funds to be 
assigned shall be: (a) The proceeds of all German 
maritime and land customs and duties, and in 
particular the proceeds of all import and export 
duties, (b) Proceeds of a levy of 25% on the value 
of all exports from Germany except those exports 
upon which a levy of not less than 25% is applied 
under legislation referred to in Article 9. (c) The 
proceeds of such direct or indirect taxes or any 
other funds as may be proposed by the German 
Government and accepted by the Committee on 
Guarantees in addition to, or in substitution for, 
the funds specified in (a) or (b) above. 

The assigned funds shall be paid to the accounts 
to be opened in the name of the Committee and 
supervised by it in gold or in foreign currencies 
approved by the Committee. The equivalent of the 
25% levy referred to in Paragraph B shall be paid 
in German currency by the German Government 
to the exporter. 

The German Government shall notify to the Com- 
mittee on Guarantees any proposed action which 
may tend to diminish the proceeds of any of the 

[93] 



THE PEACE OF JUSTICE 

assigned funds and shall, if the Committee demands 
it, substitute some other approved funds. 

The Committee on Guarantees shall be charged 
further with the duty of conducting on behalf of 
the Commission the examination provided for in 
Paragraph 12B of Annex 2 to Part VIII, of the 
Treaty of Versailles, and of verifying on behalf 
of the Commission and, if necessary, of correcting 
the amount declared by the German Government 
as the value of German exports for the purpose of 
calculation of the sum payable in each year or quar- 
ter under Article IV, Paragraph 2, and the amounts 
of the funds assigned under this Article to the 
service of the bonds. The Committee shall be 
entitled to take such measures as it may deem 
necessary for the proper discharge of its duties. 

The Committee on Guarantees is not authorized 
to interfere in the German administration. 

(8) In accordance with Paragraph 19, Clause 2 
of Annex 2, as amended, Germany shall on demand, 
subject to prior approval of the Commission, pro- 
vide such material and labor as any of the Allied 
Powers may require toward restoration of the 
devastated areas of that Power, or enable any 
Allied Power to proceed with the restoration or the 
development of its industrial or economic life. 
The value of such material and labor shall be 
determined in each case by a valuer appointed by 
Germany and an agreement, by a referee nominated 
by the Commission. This provision as to valuation 
does not apply to deliveries under Annexes 3, 4, 
5 and 6, Part VIII, of the Treaty. 

[94] 



APPENDIX 

(9) Germany shall take every necessary measure 
of legislative and administrative action to facilitate 
the operation of the German Reparation (Recovery*) 
Act of 192 1 in force in the United Kingdom and of 
any similar legislation enacted by any Allied Power 
so long as such legislation remains in force. 

The payments effected by the operation of such 
legislation shall be credited to Germany on account 
of payments to be made by her under Article IV, 
Clause 2. The equivalent in Germany currency 
shall be paid by the German Government to the 
exporter. 

(10) Payments for all services rendered, all 
deliveries in kind and all receipts under Article 9 
shall be made to the Reparations Commission by 
the Allied Power receiving the same in cash or cur- 
rent coupons within one month of the receipt thereof 
and shall be credited to Germany on account of 
payments to be made by her under Article 4. 

(11) The sums payable under Article 4, Clause 3, 
and any surplus of receipts by the Commission under 
Article 4, Clauses 1 and 2, in each year not required 
for payment of interest and sinking fund on bonds 
outstanding in that year, shall be accumulated and 
applied so far as they will extend, at such times as 
the Commission may think fit, by the Commission 
in paying simple interest not exceeding 2>^% 
per annum from May 1st, 192 1, to May 1st, 1926, 
and thereafter at a rate not exceeding 5% on the 
balance of the debt not covered by bonds jthen 
issued. The interest on such balance of the debt 
shall not be cumulative. No interest therefor shall 

[95] 



THE PEACE OF JUSTICE 

be payable otherwise than as provided in this 
paragraph. 

(12) The present schedule does not modify the 
provisions for securing the execution of the Treaty 
of Versailles which are applicable to the stipulations 
of the present schedule. 



THE END 



[96] 



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